2005 (9) TMI 521

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....d by the revenue but effectively the only grievance is that the CIT(A) has erred in deleting the pro rata allocation of expenditure relating to speculation business. 3. The assessee had declared loss in share trading transactions at Rs. 2,93,732 which was increased by the Assessing Officer to Rs. 13,16,949. He held that the expenditure of Rs. 24,28,801 incurred by the assessee during the year is to be divided for earning brokerage income and also for making sale and purchase of shares on pro rata basis and as such he allocated proportionate establishment expenses to the trading of shares. Thereby the loss had increased to Rs. 13,16,949 as against Rs. 2,93,732 declared by the assessee, which is treated as speculation loss as per Explanati....

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....he addition made by the Assessing Officer. 5. Learned DR Shri Manoj Kumar stated before us that there is no dispute that Explanation to section 73 is applicable to this case. He further stated that the Explanation to section 73 has been taken into account by the ld. CIT(A), in isolation ignoring the basic provisions of section 73. According to him the case of M. Rangaswami (supra), was not applicable as the same was of Wealth-tax Act. He relied on the case of Sind National Sugar Mills (P.) Ltd. v. CIT [1980] 121 ITR 742 (Bom.). 6. On the other hand, Shri Atul Jasani, ld. Counsel for the assessee stated that these transactions are not of speculative nature as provided in section 43(5) but these are deemed to be speculative transactions....

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....assessee shall not be set off except against profits and gains, if any, of another speculation business. Explanation to section 73 provides that speculation business shall be to the extent to which the business consist of the purchase and sale of such shares. Section 73(1) provides that loss computed of a speculation business shall not be set off against gains of any business other than speculation and the Explanation to section 73 provides what constitute the speculation business. In our opinion, section 73(1) requires loss to be computed in respect of speculation business and in computing the said loss, the expenses incurred on purchase and sale of such shares has to be taken into account. It is not the case of the assessee that no expens....