Section 94(8) of it act

No it is not applicable for shares, only for units

Introduction of section 94(8) by the Finance Act, 2004, with effect from April 1, 2005, has countered bonus-stripping activities in respect of mutual fund units.

These restrictive provisions are applicable if the following conditions are met:

1. The purchase of units (original units) has been made within a period of three months prior to the record date

2. Such person is allotted additional units (bonus units) without any payment, on the basis of his holdings on the record date; and

3. Such person sells or transfers all (or any) of the original units within a period of nine months after the record date but continues to hold all (or any) of the bonus units

Section 94 (8) is applicable only for mutual fund units. not for shares

Not applicable on shares.

Section 94(8)

However, in respect of bonus stripping, the provisions of section 94(8) apply only to units of mutual funds, and not to shares of companies. One often witnesses assessees resorting to bonus stripping in respect of shares, simultaneously resorting to hedging of the open position in respect of shares through derivatives transactions.

I am not ever heard that any mutual fund issue bonus till now, I think it is not possible by its nature. If some assessee have bonus stripping of equity shares on the ground of section 94(8), then it may be commercial loss because it is only for units and that word not used in equity shares.

Yaa..the relavant section queried is not applicable on shares..

Thanks everyone....

Bonus stripping is banned on Mutual Funds