TaxTMI 
TaxTMI 
1990 (4) TMI 288
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....sment year under consideration?" 2. The assessment year involved is 1978-79 for which the relevant period of account is the year ended on 3-6-1977. 3. The facts found by the Tribunal are as under: "The assessee is a limited company. The assessment year involved in the case is 1978-79. The company during the relevant assessment year was engaged in dealing in paper, coal, chemicals, etc., and it was also engaged in coal handling. In the assessment for the assessment year under reference, the ITO made an addition of ₹ 1,20.632 with the following observation: Loss on share dealing to be considered later vide Explanation to section 73 of the IT Act, 1961 as speculation loss: Rs. Rs. Opening stock 8,84.787 Less : Sales ....
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....hat the fiction embodied in the Explanation is only 'for the purpose of this section' that is, where losses are incurred in shares and are sought to be set off against other income. The ITO has worked out the loss at ₹ 1,20,632 exclusive of apportionment to the extent of ₹ 70.000 out of administrative expenses and interest charged to profits and loss account which is reproduced below: Rs. Rs. Opening Stock 8,84,787 Less : Sales: 60,339 Closing Stock 7,03,816 7,64,155 Loss 1,20,632 The fact that during the year there was sale of only 8 bonus shares in addition to redemption of 500 debentures and that there was no loss on either account does not make any difference to the position that there was loss in share ....
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....in his assumption that in order to attract the Explanation the business of the company is to consist either in the purchase or sale of shares. When Explanation uses the words purchase and sale of shares instead of the words 'purchase or sale of shares' we do not think that the CIT (Appeals) was at liberty to change the word 'and' to 'or'. He himself held that there was no purchase of shares during the year under examination. As such one of the conditions required under the Explanation was lacking in the instant case and as such the Explanation could not be used against the assessee-company. It is not the case of the department that without the help of the Explanation the assessee-company can be said to be carrying on....
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....ists 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." 6. The section will apply where any part of the business of the company 'consists' in the purchase and sale of shares of other companies. Therefore, it has to be seen whether the assessee-company has such a business. It may be that in a particular year shares were only sold or in a particular year the shares were only purchased. The section does not require that both sale and purchase should take place in the same year. What is to be seen is whether the business of the company co....