TaxTMI 
TaxTMI 
2011 (1) TMI 913
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....ot pressed by the learned counsel for the assessee at the time of hearing. Accordingly, the same is rejected. 3. The ground No. 2 of the assessee's appeal reads as under : "2. The ld. CIT(A) has erred in law and on facts in confirming the action of the Assessing Officer in treating business loss on shares amounting to Rs. 37,96,726 as speculation loss without assigning any reasons and grounds." 4. At the time of hearing before us, it is stated by the learned counsel that the Explanation to section 73 is applicable only in respect of loss from purchase and sale of shares. During the year under consideration, the assessee suffered loss from the purchase and sales of shares amounting to Rs. 9,68,183 which was disallowed by the assessee as a speculation loss. However, further loss of Rs. 37,96,7826 was incurred by the assessee due to valuation of closing stock. That the loss from the valuation of closing stock cannot be considered and equated with the loss from the purchase and sales of shares, and therefore, the same would be out of the purview of the Explanation to section 73. That the Explanation to section 73 is deeming provision and it is to be strictly interpreted. He th....
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....e on account of depreciation or capital expenditure on scientific research, the provisions of sub-section (2) of section 72 shall apply in relation to speculation business as they apply in relation to any other business. (4) No loss shall be carried forward under this section for more than four assessment years immediately succeeding the assessment year for which the loss was first computed. 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." As per sub-section (1) of section 73 any loss computed in respect of speculation business carried on by the assessee shall not be set off except against the prof....
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.... and sale of shares and the valuation of the closing stock at less than the cost is the accounting for the anticipated loss from the business of purchase and sale of shares. Therefore, the contention of the learned counsel that the loss from the purchase and sale of shares and loss from the valuation of the closing stock is to be treated separately cannot be accepted. There is only one trading account in respect of the business of purchase and sale of shares. In such trading account profit/loss is to be worked out of course, after taking the value of the stock as per the method of accounting for valuation of the closing stock being regularly followed by the assessee. After such valuation of closing stock, whatever profit or loss arises, it would be profit/loss from the business of purchase and sales of the shares. There cannot be any artificial division of such loss between the loss from trading in shares and loss from valuation of closing stock. While taking this view, we derive support from the decision of Hon'ble Apex Court in the case of Chainrup Sampatram v. CIT [1953] 24 ITR 481 wherein Their Lordships held : "It is a misconception to think that any profit "arises out of t....
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....is integral part of preparation of treading account. In view of the above, we reject the ground No. 2 of the assessee's appeal. 8. The ground No. 3 of the assessee's appeal reads as under : "3. The ld. CIT(A) has erred in law and on facts in confirming the action of the Assessing Officer in disallowing interest expenditure amounting of Rs. 14,28,208 on the ground of same being not attributable to the business income. Under the facts and circumstances of the case the entire interest expenditure ought to have been allowed." 9. We have heard both the parties and perused the material placed before us. We find that the assessee itself while computing the income has disallowed the sum of Rs. 14 lakhs out of the interest. The Assessing Officer has worked out disallowance of Rs. 14,28,000. It is stated by the learned counsel that though the difference in disallowance is negligible, however, the assessee is pressing the ground because the assessee is working out the disallowance in the same manner every year and it is also being accepted by the revenue. He referred to the chart at page No. 106 and pointed out that the assessee itself has considered the entire interest bearing loan ....
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....e speculation business." 12. During the year under consideration, the Assessing Officer treated long term capital gain of Rs. 6,89,218 as speculation gain. It is contended by the learned counsel that the Assessing Officer has applied Explanation to section 73 to the capital gain, which is not justified, because, the Explanation to section 73 would be applicable only for loss and not for gain and moreover, when the assessee is carrying on business of purchase and sale of shares then only the Explanation to section 73 would be applicable. The learned counsel for the assessee also relied upon the decision of the ITAT, Ahmedabad Benches in the case of Dy. CIT v. Paramount Ltd. [IT Appeal No. 1760 (Ahd.) of 2007, dated 23-4-2010]. The learned DR, on the other relied upon the orders of the authorities. 13. We have carefully considered the arguments of both the sides and perused the material placed before us. While considering the Ground No. 2 of the assessee's appeal, we have referred to section 73 as well as Explanation thereto. Section 73 is applicable in respect of loss in speculation business. As per Explanation to section 73, where any part of the business of the assessee comp....