TaxTMI 
TaxTMI 
2016 (3) TMI 685
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....sessee, thus has come up in appeal. The questions raised by the assessee are as follows:- (a) Whether the Tribunal was justified in law in reversing the order of the Commissioner of Income Tax (Appeals) and in upholding the disallowance of Rs. 9,79,873/- made by the Assessing Officer under section 14A of the Income Tax Act, 1961 as expenditure incurred in relation to the dividend income of Rs. 33,288/- and its purported findings in that behalf are arbitrary, unreasonable and perverse? (b) Whether on a true and proper interpretation of the Explanation to section 73 of the Income Tax Act, 1961, the Tribunal was justified in law in holding that the loss of Rs. 3,24,76,185/- incurred in eligible transactions within the meaning of provi....
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....g the exempt income. Therefore, the CIT (A) had reduced the sum of Rs. 9,79,873/- by 50% but the learned Tribunal without any reason restored it to 100%. With regard to the second and the third questions, Mr. Khaitan submitted that the loss incurred by the assessee to the tune of Rs. 3,24,76,184/- was on account of settlement of future and option. This loss has to be treated as a business loss under the proviso to section 43(5) of the Income Tax Act. Once it is deemed to be a business loss on the basis of the proviso appended to section 43(5), the question of applying section 73 or the explanation thereto for the purpose of refusing the loss to be set off against the business income is palpably wrong. He submitted that the judgment of th....
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....urchase 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." He submitted that a company dealing in purchase and sale of shares amongst others, which does not come within the exceptions carved out in the explanation itself, is hit by the mischief of the aforesaid explanation. He added that when the business consisting of purchase and sale of shares of other companies amounts to a speculation business, can it be said that business in derivatives, which depend upon the value of the underlying shares, is anything other than a speculation business? According to him, ....
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.... - 2, the following deductions can be made:- a) Speculative transactions carried on by an assessee may be of such a nature as to constitute a business; b) Such speculation business carried on by an assessee shall be deemed to be distinct and separate from any other business. We can thus arrive at a conclusion that speculation transaction may partake the character of deemed business where statute so provides. Definition of ''speculative transaction'' has been provided in Sub-section (5) of Section 43, which in so far as material for our purposes, is as follows:- "(5) "speculative transaction" means a transaction in which a contract for the purchase or sale of any commodity, including stocks and shares, is periodic....
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.... be speculative transactions. Therefore, this comes within the category of deemed business which is however distinct and separate from any other business. Now, the question is, whether loss arising out of such deemed business can be set off against the profit arising out of other business or businesses which may for clarity be called proper business. Under Section 70 of the Act, the assessee is entitled to have the loss set off against his income from any other source under the same head unless otherwise provided. Therefore answer to the question is that the assessee is entitled to have the loss arising out of deemed business set off against the income arising out of business proper unless otherwise provided. The question however remains wh....