TaxTMI 
TaxTMI 
2001 (7) TMI 282
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....inted final accounts as under: ------------------------------------------------------------------------------ Schedule XV Year ended Year ended 31-3-1997 31-3-1996 ------------------------------------------------------------------------------ Loss on sale of investments Opening stock 8,84,242 24,33,100 Add: Purchase of shares 13,02,475 10,25,611 &....
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....wever, noticed by us that the above Schedule does not relate to any item reflected in the balance-sheet as on 31 st March, 1997 or Profit and Loss Account for the year ended 31 st March, 1997. It seems simply to be in addition to the other relevant Schedules. On the basis of the working given in the above Schedule the assessee claimed that it has incurred I loss on sale of investment of Rs.7,42,502, which has to be set off against its other business income. The Assessing Officer rejected the claim with the following remarks: "However, an amount of Rs.7,42,902 is claimed as loss on account of sale of investments. On verification it is found that it is actually loss occurring on purchase and sale of shares. As per the clear provisions of Explanation to section 73, the loss accruing on this purchase and sale of shares cannot be allowed as business loss but has to be considered as speculation loss. As the assessee-company does not fall in the exempted categories of the companies mentioned in the Explanation, the same is considered as speculation loss. In this connection, I also rely on the decision of the Hyderabad ITAT 'A' Bench No. ITA No. 366/Hyd./99 dated 30-12-1999 in the case of....
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....s in terms of section 43(5) has no application as the case of the appellant is squarely covered by the provisions of Explanation to section 73. The case laws cited from the appellant's side also do not have any application because in those cases the assessees were not engaged in the business of purchase and sale of shares and they were dealing in other goods. The disallowance made by the Assessing Officer is, therefore, confirmed." It may be observed that the CIT(A) did not specifically remark on the finding of the Assessing Officer that the loss of Rs.7,42,502 was not on account of sale of investments. He neither agreed with his finding nor disagreed with it. So, there was nothing in the order of the CIT(A) to dislodge the finding of the Assessing Officer that the shares in question were not held as investment and were merely trading assets. The CIT(A) rejected the deduction of the loss of Rs.7,42,502 from the business income on the short ground that whether the shares were held as investments or trading assets and whether they were actually delivered or not the provisions of Explanation to section 73 are attracted. We have to consider the correctness of this finding. We also hav....
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....orders of the revenue authorities deserve to be upheld. Before we give our reasons, it is worthwhile to refer to the provisions of Explanation to section 73, which reads as under: 'Explanation: Where any part of the business of a company (other than a company whose gross total income consists mainly of income which is chargeable under the heads 'Interest on securities', 'Income from house property', 'Capital gains' and 'Income from other sources'), or a company (the principal business of which is the business of banking or the granting of loans and advances) consists in the purchase and sale of shares of other companies, such company shall, for the purposes of this section, be deemed to be carrying on a speculation business to the extent to which the business consists of the purchase and sale of such shares." It may be observed that the Explanation is a deeming provision. Under the specified circumstances, even a normal business is regarded as a speculation business. Because the Explanation is a deeming provision, the question whether the transaction is a speculative transaction in terms of section 43(5) or not is irrelevant. Even if a transaction is not speculative because it sa....
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.... with investments shown at Rs.15,65,000. The computation of the loss of Rs.7,42,502 starts with the opening stock of Rs.8,84,242 which is shownn as inventories as on 31-3-1996 and included under the head "current assets'. So, obviously, the opening stock of Rs.8,84,242 was held only as stock-in-trade as on 31-3-1996 and not as investments. It is not clear how the stock-in-trade got converted subsequently into investments. No declaration of such conversion has been filed before us or such conversion adverted to in the course of hearing before us or at any other stage. Even the closing stock of Rs.1,52,250 as on 31-3-1997 shown in Schedule-XV is included as inventories in the balance sheet as on 31-3-1997 as per Sched ule-VI. Actually, this amount of Rs.1,52,250 is the value of 3,500 shares of Global Trust Bank, which were included in the opening stock of Rs.8,84,242. This fact is evident from the details of the purchases and sales of shares filed before us as relating to the reflected loss of Rs.7,52,502. From the same details it is also evident that the relevant purchases and sales of the shares claimed as investments before us, has been effected with a frequency, which is indicati....
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....; 4,961 - NSE Penalty Points 38,665 - Delivery Handling Charges 68,136 - Interest Received 1,86,174 6,07,969 Interest on F.D.R. 2,42,099 - Lease rentals &nb....
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....Explanation to section 73. 8.2 The decision of the Hon'ble Calcutta High Court, in the case of CIT v. Arvind Mills, is also on similar lines and actually favours the revenue. The decision of the Hon'ble A.P. High Court in the case of Lakshminarayana Trading Co. relied on by the assessee before the CIT(A), is in the context of section 43(5) of the Income-tax Act and considers the issue whether when goods are despatched by seller goods and the buyer sells the goods by transfer of the railway receipt in favour of a third party, there is delivery of goods, within the meaning of section 43(5) of the Income-tax Act. The Hon'ble Andhra Pradesh High Court came to the conclusion that in such a situation, there is actual delivery by the original seller to the assessee-buyer and so, the transaction is not speculative in terms of section 43(5) of the Income-tax Act. This issue is totally different from the one falling for consideration before us, ie. whether the provisions of section 73 are attracted. 8.3 In the case of Ketan Kumar A. Shah the Hon'ble Kerala High Court held that when the shares are held as personal assets by a broker, the gains arising on the sale of such shares is assessabl....