TaxTMI 
TaxTMI 
2006 (8) TMI 444
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....unt, the assessee had shown income from interest at Rs. 22,92,844 and also shown loss on account of sale of shares of Rs. 10,93,465. The said loss on share was set off against income from interest and shown resultant income of Rs. 9,45,100 in the return. The said return was processed on the same income on 23-2-1996. 3. Subsequently, proceedings under section 147 of the Act was initiated by issuing notice under section 148 of the Act stating that assessee is a holding company of M/s. Somani Iron & Steel Co. Ltd. The holding companies of M/s. Somani Iron & Steel Co. Ltd. controlled by the Directors and their family members were claiming the bogus share loss by means of transfer of shares held by one company to another company. The share loss....
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.... to be disregarded for set off. Hence the assessee is in further appeal before the Tribunal. 5. In ground Nos. 1 to 3 of the appeal, the assessee has disputed the validity of initiation of reassessment proceedings and also validity of assessment order on the ground of violation of principle of natural justice. However, during the course of hearing, the ld. authorized representative of the assessee submitted that ground Nos. 1 to 3 of the appeal are not pressed for. Hence, ground Nos. 1 to 3 of the appeal are rejected as not pressed for. 6. In ground No. 4 of the appeal the assessee has disputed the order of the ld. CIT(A) in confirming the disallowance of loss of Rs. 10,93,465. Before we take up the said ground for our consideration on me....
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....ose shares transferred in its name and subsequently sold the same. He submitted that the assessee suffered loss in the said transaction of purchase and sale of shares of Rs. 10,93,465. The ld. authorized representative of the assessee further referred to pages 3 & 4 of the paper book, which is copy of the balance sheet and copy of profit of loss account, and submitted that the principle business of the assessee is to give loan and advances, as the assessee had given loans and advances to the extent of 79.35 per cent of its capital and earned also interest of Rs. 20,84,022. He submitted that provisions of Explanation to section 73 of the Act are not applicable to the case of the assessee. The ld. authorized representative of the assessee sub....
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.... a speculative loss under Explanation to section 73 of the Act, but also on the ground that it was not a genuine transaction entered into by the assessee. 9. We have considered the orders of the authorities below and submissions of the ld. representative of the parties. 10. We observed that the Assessing Officer has held that loss claimed by the assessee is a capital loss. However, the Assessing Officer has not given any justification to treat the said loss claimed by the assessee, as capital loss save and except stating that shares were investment of the assessee. Further, we observed that the ld. CIT(A) has rejected the claim of the assessee on account of two reasons - firstly that the transactions entered into by the assessee for purch....
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..../s. N.K. Gupta & Associates, we find substance in the submission of the ld. authorized representative of the assessee that after a gap of about 10 years when the assessee was asked to produce the said brokers, the assessee could not be made responsible if the said broker is not available at the address as in mentioned in the bills filed by the assessee at pages 36 to 43 of the paper book. In this regard, we are fortified with our views when the assessee has filed copies of letters from the companies name. M/s. Sewa Mercantile Ltd. dated 23-12-2004 and 4-1-2005 and also from M/s. Ocean Impex Ltd. dated 28-12-2004 and 4-1-2005, the copies of which are placed at pages 52 to 55 of the paper book vide which these companies have confirmed transfe....
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....e Act i.e., whether it is a speculative loss. Explanation to section 73 prohibits setting-off of shares in loss suffered by a company. However, there are two exceptions to the said prohibition. They are (a) if a company whose gross total income consist mainly of income that is chargeable under the head "interest on house property, capital gains and income from other sources" or (b) a company, the principle business of which is the business of banking or granting of loans and advances. In such a case, prohibition to set off loss suffered by an assessee-company in its share transactions is not prohibited if the assessee-company falls in the category of any of the two exceptions as mentioned hereinabove. In the case before us, we observed that....