TaxTMI 
TaxTMI 
TaxTMI 
2016 (5) TMI 430
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....that provisions to Section 73 are not applicable in the case of an assessee dealing in shares. 3. Whether on the facts and circumstances of the case, Ld. CIT(A) erred in law in stating that the business of dealing in shares is one and inseparable and it could not separated into speculative and non speculative business. 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. 4. The Assessee is a company. It is engaged in the business of trading in shares on own account, derivative transactions and share broking activity The Assessee incurred a loss of Rs. 34,61,912/- in share trading on his own account. It is not in dispute that there was actual delivery of shares in the transactions carried out by the Assessee which resulted in the loss in the business of trading in shares on own account by the Assessee. The Assessee earned profit of Rs. 90,58,340/- from trading in Derivatives (Futres & Options). The Assessee adjusted the loss arising from own trading in shares against the profits from trading in derivatives and declared the resulted income under the head "Income from Business". The AO was of the view th....
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....sale of shares of other companies than such company shall 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 are exceptions set out in the explanation. The explanation does not apply to (a) a company whose gross total income consists mainly of income which is chargeable under the head "Interest on securities", "Income from house property", "Capital gains" and "Income from other sources": (b) a company the principal business of which is the business of banking (c) a company whose principal business of which is granting of loans and advances. It can also be seen from Sec.73(1) of the Act that any loss, computed in respect of a speculation business carried on by the assessee, shall not be set off except against profits and gains, if any, of another speculation business. 6. The profits from dealing in derivatives are not in the nature of profits and gains of speculation business in view of proviso (d) to Sec.43(5) of the Act, which reads thus: "Sec.43: Definitions of certain terms relevant to income from profits and gains of business or profession. In sections 28 to 41 and in this se....
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.... trading in shares and business of dealing in derivatives were to be regarded as one business and loss in share trading ought to be allowed to be set off against the income from trading in derivatives. Such set off has to be done even before the stage of application of Chapter VI of the Act which contains the provisions of Sec.73 of the Act. 9. According to the AO, the two business of dealing in shares and share broking were distinct businesses. In share broking business the Assessee buys and sells stocks and shares on behalf of the client. The risk and rewards are that of the client and not of the Assessee. The Assessee receives commission for his services. In the business of dealing in shares where shares and brought and sold, irrespective of delivery or no delivery, the deeming provisions of Explanation to Sec.73 will operate. The AO in this regard referred to the decision of the Hon'ble Calcutta High Court in the case of R.P.G. Industries Ltd. vs. CIT & Anr. (2011) 241 CTR (Cal) 19 wherein it was held that by Explanation to s. 73, a legal fiction has been created whereby loss suffered by a company in share transactions is to be treated as a speculative loss within the meaning ....
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....rage, dividend, misc. income, penalty charge recovered, F&O & share trading etc. The income and expenditure account shows that there is a profit of Rs. 27,96,413/-. The appellant has income from derivative trading amounting to Rs. 90,58,340/- and stock broking operations amounting to Rs. 9,58,95,368/- and loss from share trading of Rs. 34,61,912/-. The appellant has shown an income of Rs. 30,88,216/- in the return filed on 27.09.2009. There is a net income of the appellant from F & O and share trading as combined activities/part of business." 13. The CIT(A) thereafter found that the ITAT Calcutta bench in the case of ITO Vs. Arena Textiles & Industries Ltd. In ITA No.1019/Kol/2011 dated 29.12.2011 and in the case of ITO Vs. Rajanigandha Properties Ltd. In ITA No.1011/Kol/2011 dated 29.12.2011 and M/S.Arion Commercial Pvt.Ltd. ITA No.1010/kol/2011 dated 29.12.2011 held that transactions done by delivery as well as the transaction in derivative trading are not hit by Sec.43(5) of the Act and therefore income or loss from the respective businesses have to be aggregated before application of Explanation to Sec.73 of the Act. 14. The CIT(A) thereafter observed as follows: "32. The s....
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....able in the case of the appellant. Hence, the amount of Rs. 34,61,912/- is allowed to be set off with income from derivative trading. This ground of appeal is allowed." 15. Aggrieved by the order of the CIT(A), the revenue is in appeal before the Tribunal. The request for adjournment made on behalf of the learned DR was refused as the issues raised by the revenue in the grounds of appeal have been consistently held against the revenue in several decisions, referred to by the learned AR before us. 16. We have considered the submissions made before us in the light of the various decisions rendered on identical facts and circumstances of the case such as the Assessee. In the case of ITO Vs. Bijco Holdings Ltd., ITA No.1036/Kol/2012 dated 9.1.2015 rendered by a co-ordinate Bench of ITAT, Kolkata, the facts were identical to the facts of the Assessee in the present appeal. The Assessee in that case for the relevant assessment year 2007-08 reflected income from share trading, investment in shares and securities and also financing. The AO noticed from the Profit & Loss a/c. that it had earned interest income of Rs. 3,53,956/- and also noticed that the assessee has suffered loss of Rs. 5....
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....tself does not qualify for the benefit, as they (derivatives - once removed from it and entirely dependent on stocks and shares, for determination of their value)." In view of the alternative plea of the assessee, we are in agreement with the argument of Ld. counsel for the assessee that the income from derivatives is defined in section 43(5) of the Act and since it excludes such transactions from the nature of speculative transaction and AO treats that the transaction has not been excluded from section 73 of the Act, therefore, the assessee was entitled to claim the loss of shares against the income of derivatives. Respectfully following the decision of Hon'ble Delhi High Court in the case of DLF Commercial Developers Ltd. supra, we allow the alternative claim of the assessee and direct the AO to allow this loss against derivative incomes. This issue of revenue's appeal is dismissed but on alternative plea of the assessee." 17. The facts of the case before the Hon'ble Delhi High Court in the case of DLF Commercial (supra) were that the assessee claimed loss of Rs. 492.71 lakhs on account of purchase and sale of shares. The assessee argued that the loss in trading of deriv....