TaxTMI 
TaxTMI 
TaxTMI 
2005 (6) TMI 228
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....ee declared brokerage income of Rs. 32,57,942. At the same time, the assessee disclosed loss in share trading at Rs. 34,73,739 and adjusted the same against share brokerage income and income of the assessee from capital gains and other sources. The learned AO referred to the provisions of Explanation to s. 73 and asked the assessee as to why the loss of Rs. 34,73,739 on share trading be not treated as deemed speculation loss. The assessee replied that purchase and sale of shares was the main business of the assessee-company as distinct from the expression "part of the business of the company" mentioned in Explanation to s. 73. As the main business of the assessee consisted of sale and purchase of shares, Explanation to s. 73 did not apply. Alternatively, the assessee argued that if it were to be treated as having been caught by Explanation to s. 73, then the whole business of the assessee shall become speculative business thereby leading to the similar tax liability as had been computed by the assessee. 3. The learned AO held that during the year the assessee-company had carried out two distinct businesses, (i) purchase and sale of shares on behalf of the clients on brokerage; and....
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....n shares. The assessee relied upon the judgment of the Hon'ble Supreme Court in the case of CIT vs. Gwalior Rayon Silk Mfg. Co. Ltd. & Ors. (1992) 104 CTR (SC) 243: (1992) 196 ITR 149 (SC). Relying on that judgment, the assessee argued that the expressions used in a taxing statute should be understood in the sense which is harmonious with the objective of the statute. From the background facts of the enactment of s. 73 it was clear that Explanation had been appended to s. 73 to counter tax avoidance devices. The assessee in the present case was not a manufacturer and it had incurred loss in sale and purchase of shares in the ordinary course of trading. The assessee's transactions were not limited to any particular group of companies. The assessee became a member of the National Stock Exchange and for the purpose the assessee deposited 30,000 shares of Flex Industries Ltd. with National Securities Clearing Corporation Ltd. as per requirements of National Stock Exchange. The major loss had arisen to the assessee on account of depreciation in the value of the shares of Flex Industries. The assessee not having entered into any tax avoidance device, the assessee's case was c....
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.... According to the assessee, that income also ¦should have been adjusted against the share trading loss. Similarly, the assessee contended that dividend income should also have been adjusted against share trading loss. 6. The learned CIT(A) held that facts of the assessee's case were distinguished from various judgments relied upon by the AO because the same had not been delivered in the context of Explanation to s. 73. The learned CIT(A), therefore, held that Explanation to s. 73 was not applicable to the case of the assessee. The CIT(A) agreed with the alternative plea also of the assessee that both loss in sale and purchase of shares and income by way of brokerage should be dealt with under one head. The learned CIT(A) agreed further that loss arising on the holding of shares placed with NSCCL should be charged against the brokerage amount. In addition, the CIT(A) held that no expenses should be allocated to the business of sale and purchase of shares; the dividend income of Rs. 1,54,070 and capital gain income also should be adjusted against the loss arising from the business of sale and purchase of shares. Aggrieved, the Revenue is in appeal before us. 7. Ground of....
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....) Ltd. vs. Dy. CIT (2005) 92 TTJ (Del) 351. 10. The learned counsel then argued that if at all the assessee's business of purchase and sale of shares was to be treated as speculation business, that equally applied to the assessee's share broking business. For both the business activities the assessee purchased and sold shares with the only difference that while in the former the assessee earned brokerage, in the latter the assessee earned profit or, as the case may be, incurred loss. He emphasized that as far as the provisions of Explanation were concerned, it was nowhere specified that the provisions were restricted to share trading. As a matter of fact, the expression "trade" or "trading" did not occur anywhere in the Explanation. The Explanation simply referred to the business that consists in purchase and sale of shares. The learned counsel pointed out the difference between the phrases "consist of" and "consist in". According to the Webster's Dictionary of the English Language, "consist of" meant "to be made up or composed", "the programme consists of three plays." As against that the phrase "consist in" meant "to reside or lie". The advantage "consists in" its si....
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....rgument of the assessee that there must be suggestion of tax avoidance scheme before the provisions of Explanation to s. 73 may be invoked. Reliance in that respect has been placed on the judgment of Hon'ble Supreme Court in the case of CIT vs. Gwalior Rayon Silk Mfg. Co. Ltd. & Ors. In that judgment the Hon'ble Supreme Court emphasized that if the language is plain and unambiguous one can only look fairly at the language used and interpret it to give effect to the legislative intention. It is well-settled position in law that rules of interpretation can be put into service only where the language of the statute is ambiguous or capable of more than one meaning. In the case of CIT vs. Sodra Devi (1957) 32 ITR 615 (SC) the Hon'ble Supreme Court have held that unless there is any ambiguity it would not be open to the Court to depart from the normal rule of construction, i.e., the intention of the legislature should be primarily gathered from the words which are used. The same view has been reiterated by the Hon'ble Supreme Court in the case of Smt. Tarulata Shyam & Ors. vs. CIT 1977 CTR (SC) 275 : (1977) 108 ITR 345 (SC). Insofar as provisions of Explanation to s. 73 a....
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....of interpretation of a statute is to discover the intention of Parliament as expressed in the Act. The dominant purpose in construing a statute is to ascertain the intention of the legislature as expressed in the statute, considering it as a whole and in its context. That intention, and therefore, the meaning of the statute, is primarily to be sought in the words used in the statute itself, which must, if they are plain and unambiguous, be applied as they stand ........ Artificial and unduly latitudinarian rules of construction which with their general tendency to "give the taxpayer the breaks", are out of place where the legislation has a fiscal mission. "In Doypack Systems (P) Ltd. it was further observed that "contemporanea expositio is a well-settled principle or doctrine which applies only to the construction of ambiguous language in old statutes ........... It is not applicable to modern statutes." Further, a Division Bench of the Delhi Tribunal in the case of SRJ Securities Ltd. vs. Asstt. CIT (2003) 81 TTJ (Del) 484 after exhaustively considering the various aspects, has held in similar facts that loss suffered by assessee, a share broker-cum-dealer, on purchase and sale o....
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.... material difference between the facts of that case and the facts of the assessee before us. Similarly, in the case of CIT vs. Pangal Vittal Nayak & Co. (P) Ltd., the assessee who had speculated on its own was precluded to set off its losses in speculation against commission income earned on the speculative transactions of the assessee's constituents. Hon'ble Supreme Court clearly held that there was no element of speculation whatever in the commission income received by the assessee and that the commission was independent of any fluctuation in the market and that the commission was earned not as a profit from the speculation, but from the business as a broker. In our humble opinion, both the judgments are clearly against the claim of the assessee that its business of share trading and its business of share brokerage should be considered together for the purpose of Explanation to s. 73. 15. During the course of hearing before us, the learned counsel placed reliance on the decision of Tribunal, Bombay, in the case of Aakrosh Investment & Leasing (P) Ltd. We find that judgment to be against the contentions of the assessee and in favour of the Revenue. We are also at loss to ....