TaxTMI 
TaxTMI 
2008 (7) TMI 618
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....tions. It was contended that both transactions were to be treated as composite business. Not convinced, the Assessing Officer did not allow set off of the speculation loss from the regular business income. The ld. CIT(A) upheld the assessment order on this point by considering the judgments of Hon'ble Calcutta High Court in the cases of CIT v. Sun Distributors & Mining Co. Ltd. [1993] 68 Taxman 223 , CIT v. Arvind Investment Ltd. [1991] 192 ITR 365 and an order passed by the Delhi Bench of the Tribunal in SRJ Securities Ltd. v. Asstt. CIT [2003] 86 ITD 583 . The case law relied upon by the ld. AR, listed at page 2 of the impugned order, did not find favour with the ld. CIT(A). 4. Before us, the ld. counsel for the assessee made multi-fold submissions. Explaining the business activities, it was stated that the assessee was a sub-broker and the commission so earned from its business was in the nature of business income. It was further submitted that even if the clients were purchasing or selling the shares in the nature of speculative transactions, that did not hit the nature of business income in its hands. It was still further contended that sale and purchase of shares made by the....
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....ail, contended that the Explanation to section 73 was fully applicable as share brokering activity was different from trading in shares. He further referred to the judgment of Hon'ble Calcutta High Court in the case of CIT v. Park View Properties (P.) Ltd. [2003] 261 ITR 473 for making the submissions that the loss incurred on the sale and purchase of shares was rightly treated as speculative loss. 6. We have heard rival submissions and perused the relevant material on record in the light of the material placed before us and precedents cited at the Bar. From the facts recorded above, it is clear that the assessee was engaged in the business of share brokering and the main activity in this line of business is that of earning brokerage income from sale and purchase of shares for the customers. Insofar as the instant loss from sale and purchase of shares is concerned, we find that the same occurred due to trading transactions of shares entered into by the assessee on its own account and not on behalf of customers. Under these circumstances, the question to be decided is as to whether such loss could be considered as speculative or non-speculative. In order to find an answer to this q....
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.... of the company was of purchase and sale of shares. In reaching this conclusion, Circular No. 204 [which issue would be discussed infra] was also considered and thereafter the positive conclusion was drawn that the Explanation to section 73 was attracted even to the entire business of purchase and sale of shares and the loss produced by it was speculative loss. It was further held that the phrase in the Explanation to section 73 'to the extent to which the business consisted of purchase and sale of such shares' also does not indicate that the Legislature had several other actual and existing non-speculative activities of business in mind. It merely indicates the business activity which consists of purchase and sale of shares will be treated as speculation business. If the entire business activity of a company consists of purchase and sale of shares of other companies, then the entire business will be treated as speculation business. But, if apart from purchase and sale of shares, the company has other business activities, then those other activities will not be treated as speculation business. 8. It was, therefore, held that the phrase 'any part of the business' should not be rea....
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....t in the above-mentioned case of Arvind Investments Ltd. (supra.). Under these circumstances, we are of the considered opinion that Circular No. 204 cannot be read to control the language of Explanation for giving a restrictive meaning, as has been suggested by the ld. Authorised Representative. 10. Whereas in some orders Circular No. 204 has been considered and a view has been canvassed that loss in trading of shares incurred by the registered share broker cannot be considered as speculative. On the contrary, the ld. CIT(A) has also considered an order passed by the Delhi Bench of the Tribunal in the case of SRJ Securities Ltd. (supra) in which the loss emanating from the sale and purchase of shares was held to be speculative loss. It, therefore, transpires that two diagonally opposite views have been expressed by the co-ordinate Benches of the Tribunal as regards loss from business of sale and purchase of shares by a share-broker. The ordinary rule of leaning in favour of the assessee is not unexceptionable. If the judgment of a superior court taking one view has not been brought to the notice of the lower court and in whose absence, a contrary view has been expressed by the low....
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.... In that case, the company had a business of buying and selling the shares. The shares were treated as stock-in-trade. In these circumstances it was held that Explanation to section 73 was applicable. Coming back to the facts of our case, we observe that the assessee had shown share trading loss of Rs. 74,538. There is no material on record to show that shares were held by the assessee as investment and not as stock-in-trade. On the contrary, the Assessing Officer has recorded a categorical finding that the assessee was trading in shares. This finding has not been controverted by the assessee either before the first appellate authority or us. 12. The ld. AR has also relied on the order of the Special Bench in the case of Concord Commercial (P.) Ltd. (supra) which in our considered opinion is not applicable to the facts of our case. The Tribunal considered two exceptions to the Explanation, and then held that the provisions of Explanation to section 73 could not apply because the gross total income was made up of dividend from shares held as stock-in-trade. In coming to this conclusion it was found that character of gross total income for the purposes of Explanation to section 73 w....