Section 73 deeming fiction applies to genuine share-dealing and public issue allotments within purchase and sale of shares.

The Explanation to section 73 is a deeming provision that applies according to its plain language and is not confined to tax-avoidance devices; external aids such as circulars or objects cannot narrow an unambiguous fiscal provision. Shares acquired by allotment in a public issue are also within the expression "purchase and sale of shares" because acquisition for consideration constitutes purchase in the ordinary sense, and the statutory focus is on the company's share-dealing business. On that basis, the loss from sale of such shares was treated as speculation business under the deeming fiction, and the assessee's appeal failed.

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Issues: (i) Whether the Explanation to section 73 is confined to cases of tax-avoidance devices and cannot apply to genuine share transactions of companies; (ii) Whether shares acquired by allotment in a public issue are outside the expression "purchase and sale of shares" in the Explanation to section 73.

Issue (i): Whether the Explanation to section 73 is confined to cases of tax-avoidance devices and cannot apply to genuine share transactions of companies.

Analysis: The Explanation is a deeming provision enacted in clear language to treat, to the extent relevant, the business of purchase and sale of shares by specified companies as speculation business. The object stated in the circular or explanatory material may indicate the mischief sought to be addressed, but it cannot control plain statutory language where no ambiguity exists. The provision speaks to the nature of the business and not only to transactions undertaken as part of a tax-avoidance device. External aids such as circulars, objects and reasons, or general policy concerns cannot cut down the scope of unambiguous wording in a fiscal statute.

Conclusion: The Explanation to section 73 is not confined to tax-avoidance devices and applies according to its plain terms.

Issue (ii): Whether shares acquired by allotment in a public issue are outside the expression "purchase and sale of shares" in the Explanation to section 73.

Analysis: On allotment, shares come into existence as identifiable property, and acquisition for price is purchase in the ordinary and legal sense. Even apart from that, the statutory focus is on whether the company's business consists in the purchase and sale of shares, not on the precise mode by which the shares were first acquired. The substance of the activity was dealing in shares for consideration, and the subsequent sale of those shares falls within the statutory phrase used in the deeming provision. The argument that allotment is not purchase does not exclude such transactions from the scope of the Explanation.

Conclusion: Shares acquired by allotment in a public issue are not excluded from the expression "purchase and sale of shares" for purposes of the Explanation to section 73.

Final Conclusion: The assessee's loss from sale of shares acquired through public issue allotment was held to fall within the deeming fiction of speculation business under the Explanation to section 73, and the appeal failed.

Ratio Decidendi: Where the statutory language is clear, the Explanation to section 73 applies to the business of purchase and sale of shares of specified companies according to its plain terms, and shares acquired by allotment for consideration are within that expression.

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