Section 10(33) — Income-tax Act, 1961

Section 10(33) of the Income-tax Act, 1961 provides an exemption for income arising from the transfer of a capital asset, being a unit of the Unit Scheme, 1964, made by the Unit Trust of India (UTI). This section was introduced to encourage investments in UTI by exempting the income from such transfers from being included in the total income of the assessee. The exemption applies only to the specified units and is significant as it provides a tax incentive for investors, promoting savings and investments in government-backed schemes. The statutory test requires that the income must be from the transfer of units of the specified scheme, and the burden of proof lies with the taxpayer to demonstrate eligibility for the exemption. In practice, this section is significant for investors in UTI schemes, as it directly impacts the taxability of their investment returns.

Common Litigation Flashpoints

1. Dispute over the eligibility of units for exemption
2. Interpretation of 'transfer' under the section
3. Burden of proof on the taxpayer to prove exemption eligibility
4. Misclassification of income leading to denial of exemption

Judgments on Section 10(33) — Income-tax Act, 1961

• Reliance Capital Ltd. vs Dy. Commissioner of Income Tax — ITAT,
  If there are sufficient interest-free funds available, it can be presumed that investments were made from these funds rather than borrowed funds.
• Union of India & Anr. vs M/s. Ganpati Dealcom Pvt. Ltd. — SC,
  The 2016 Amendment Act cannot be applied retrospectively as it creates new offences and substantive changes, which cannot be applied to past transactions.
• C.I.T., Mumbai vs M/s. Walfort Share & Stock Brokers P. Ltd. — SC,
  Section 14A does not apply to dividend stripping transactions prior to 1.4.2002, and losses from such transactions cannot be disallowed as artificial.
• Godrej & Boyce Manufacturing Company Limited vs Dy. Commissioner of Income-Tax & Anr. — SC,
  Section 14A applies to dividend income on which tax is payable under Section 115-O, disallowing deduction of expenditure incurred in earning such income.
• Cheminvest Limited vs Commissioner of Income Tax-VI — HC,
  Section 14A will not apply if no exempt income is received or receivable during the relevant previous year.