TaxTMI 
TaxTMI 
2005 (9) TMI 509
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....where delivery of shares were taken, as speculation loss, contrary to the provisions of sections 28 to 43. 2. That the CIT(A) was wrong to apply the Explanation to section 73, which is limited to section 73 only, to treat the business loss in shares as speculation loss. 3. That the CIT(A) wrongly applied the Explanation to section 73 to the facts of the case, and has wrongly interpreted and applied the decision of the Calcutta High Court in 192 ITR 365 and section 73.The finding of the CIT(A) being contrary to law be vacated." 2. In brief, the facts are that the assessee is a company incorporated under the provisions of the Companies Act, 1956. It is engaged in the business of dealing in shares and securities on its own account and....
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....ion loss and referred to the provisions of section 43(5) of the Act. The Assessing Officer has, however, rejected the pleas of the assessee and has treated the loss on sale of shares amounting to Rs. 30,68,331 as a speculation loss in terms of the provisions of Explanation to section 73 of the Act. The Assessing Officer accordingly did not allow the said loss to be set off against incomes under the other heads. The issue was carried in appeal before the CIT(A). Before the CIT(A), the assessee reiterated the submissions made before the Assessing Officer. The CIT(A) has since sustained the action of the Assessing Officer. Not being satisfied with the order of the CIT(A), the assessee is presently in appeal before us. 3. Before us, ld. coun....
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.... speculative character of a transaction. Ld. counsel submitted that although there are certain Tribunal decisions against the assessee and also the decision of the Calcutta High Court in the case of CIT v. Arvind Investments Ltd. [1991] 192 ITR 365 , it was vehemently argued that the aforesaid decisions have not taken into consideration the legal proposition presently being canvassed by the appellant. During the course of the submissions, ld. counsel also referred to the provisions of Explanation 1 to section 24(1) of the Income-tax Act, 1922. The provisions of Explanation 1 to section 24(1) in the 1922 Act are akin to the provisions of Explanation 2 to section 28 of the present Act. It was submitted that the provisions of 1922 Act were con....
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....t case lie in a narrow compass and have been already noted by us in the earlier part of our order and therefore are not repeated for the sake of brevity. The only dispute is whether, in the facts and circumstances of the case, the provisions of Explanation to section 73 of the Act are attracted to the share dealings carried on by the assessee or not. The salient features of the fact situation before us can be appreciated as follows. The assessee-company is engaged in the business of share broking and share dealing and claimed deduction on account of loss suffered on purchase and sale of shares on its own account against the income of brokerage earned from its clients. The lower authorities have held that the loss suffered by the assessee in....
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....or the reason that the assessee being a company falls within the mischief of the said Explanation. A bare reading of the Explanation does not leave any doubt that the assessee, like the appellant before us, which carries out transactions involving the sale and purchase of shares on its own account, although supported by effecting of actual delivery, yet it is to be construed as having been carried out a speculative business. The loss so incurred can only, therefore, be set off against the profits and gains, if any, of any speculation business. The plea of the assessee that the transaction has to be regarded as speculative only within the meaning of section 43(5) cannot be doubted. However, the provisions of Explanation to section 73 create ....
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....rms of section 28 to section 44 in which it suffers a loss, it is only then that it would fall within the scope of section 73(1). According to the assessee, Explanation to section 73 will operate only to such assessees inasmuch as the said Explanation carries the expression "for the purposes of this section". In our view, the interpretation being placed by the assessee regarding the scope and ambit of Explanation to section 73 is misplaced. A bare perusal of the Explanation to section 73 militates against the contentions of the assessee. The Explanation to section 73 introduces a legal fiction. The said Explanation applies only to a company. Further, if the business of a company does not fall within the excluded categories stated therein th....