TaxTMI 
TaxTMI 
2011 (12) TMI 557
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....t delivery-based share transactions does not fall in the ambit of Explanation to section 73 of the I.T. Act. 4. That the appellant craves for leave to add, delete or modify any of the grounds of appeal before or at the time of hearing." 3. The brief facts relating to ground nos. 1 to 3 raised by the revenue are that while doing the scrutiny assessment Assessing Officer observed that during the year the assessee company was engaged in the business of finance and investment. From the details filed by the assessee in course of hearing, it is seen that the income of the assessee consisted of the following : Rs. Share difference Income 8,562 Profit/(Loss) from Dealing in Units of Mutual Funds 2,56,853 Profit/(Loss) from Derivatives (i.e. F&O) 18,23,204 Interest Income 4,61,796 Dividend 89,626 Income from Long term Capital gains 1,15,63,837 Loss from share trading (98,10,848) 43,93,030 Less: Operative Expenses 3,21,716 Profit before tax as P&L Account 40,71,314 3.1. From the above summary in can be seen that the assessee company has incurred a loss on the non-derivative section of its business which has been set off against the p....
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....er, Mumbai ITA T in the case of DCIT Vs SSKI Investors services (P) Ltd. 113 7T7 (Mumbai,) 511 and of Bangalore Tribunal in the case of C. Bharath Kumar Vs DCIT (2005) 4 SOT 593 (Bang,),held that dealing in derivative is a separate kind of transaction, which does not involve any purchase and sale o( shares and therefore, loss thereof cannot be treated as speculation loss. 3.6. Further after making long discussion as recorded in page nos. 7 to 12 the A.O came to the following conclusion: "As Share Dealing and Dealing in F&O are covered under Special Provision, I am unable to accept the contention of the assessee that the said businesses are inseparable and loss from one business can be set off with profit from other. As per Section 43(5)(d) r/w Notification No. 2/2006 dated 25.01.2006, loss from dealing in derivative on BSE and NSE, are assessable as normal business loss and in view of Explanation to Section 73 w. e. f 01.04.1997 loss from share dealing is assessable as Speculation Business Loss" "Therefore, Explanation to Section 73 dearly applies in the case of the assessee company and invoking the same I hold loss from. Dealing (as computed hereunder) as Loss from Business ....
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....18,23,204 Share Difference Income 8,562 Loss 79,79,082 3.4. As the assessee has not disputed before me the allocation of the expenses among various incomes. Hence, the net share business will be :- Loss on Share Trading (99,42,313) Profit from Derivatives(i.e.F&O) 17,98,773 Share Difference Income 8,447 81,35,093 3.5 As per the A.O, the profit from the derivative transactions of the shares is not a speculative loss in view of the special provisions of Sec.43(5)(d) of the I. Tax Act and trading loss in shares is hit by the Explanation to Sec.73 of the I. Tax Act and hence the share dealing loss, which is a deemed speculation loss can not be adjusted with profit from derivatives transaction. The Ld.A/R of the assessee has mainly relied that the aggregation of the share trading loss and profit from derivative transactions should be done before it is seen whether Explanation to Sec.73 is applicable. In my opinion, trading of shares which is done by delivery transactions are not hit by Sec.43(5) as speculation. Similarly, derivative transaction in shares profit/loss is also not hit by Sec.43(5) of the I. T. Act, which deals about speculation t....
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....stly, assessee is having profit from the share derivative transaction and loss from share trading (delivery). Both are to be treated as speculatwe before applying deeming fiction as per Explanation to Sec.73 of the I. T. Act. Section 73 of the I. T. Act deals with carry forward of the speculation loss. Before considering whether it is hit by the deeming provision of Explanation to Sec.73 of the I. Tax Act, the aggregate of the business profit / loss has to be worked out based on the non-speculative profits; either it is from share delivery or from share derivative. The net of the same is profit as such question of applying the deeming fraction of Explanation to Sec.73 of the I. T. Act does not arise. The assessee's case is fully covered by the decision of ITAT, Kolkata, in the case of ITO, Wd-3(1)/Kol Vs Lotus Homes Ltd. (supra) as well as the decision of the Hon'ble Bombay High Court in the case of Lokmat News Papers (P) Ltd. (supra) 4. At the time of hearing the ld. DR appearing on behalf of the Revenue submitted that in paragraph no.2.7 of his order the ld. CIT(A) has held that transactions of delivery based share trading is not hit by section 43(5) of the Act and similarly tr....
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....ses 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." There cannot be any dispute after a plain reading of the above provisions that if a part of the business of an assessee consists of purchases and sale of shares of other companies, the said assessee will be deemed to be carrying on speculation business to the extent of purchase and sale of such shares. The AO in this case, has taken exactly the same view and treated the share trading loss as deemed speculative in nature. Thus, the above conclusion of the AO is clearly in tune with the above quoted provisions. 4.3. He further submitted that the reliance put by the ld. CIT(A) on the decision of ITAT, Special Bench, Mumbai appears to be erroneous and misplaced one in view of the fact that once a particular profit/income is held as non-speculative in nature, it cannot be set off against any loss which is speculative in nature. This view is well supported by the decision of the Hon'ble Calcutta High Court in the case of CIT vs Parkview Properties (P) LTd reported in 261 ITR 473 (2003). In the instant case, once the AO held that ....