2016 (5) TMI 856

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....1 (hereinafter referred to as the "Act") for AY 2010-11 vide his order dated 19.12.2012. Since both the appeal and the cross objection are arising out of the same order of CIT(A), we dispose them off by this common order. 2. The issue to be decided in this appeal of revenue is as to whether Explanation to Sec. 73 of the Act can be made applicable in the facts and circumstances of the case. 3. Brief facts of this issue are that the assessee is a Private Limited Company, engaged in the business of purchase and sale of shares, securities, commodities and derivatives. The Ld. AO observed that the assessee suffered loss of Rs. 35,19,923/- from the business of purchase and sale of shares, futures and derivatives. The Ld. AO also observed th....

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....sp;   Interest income   Rs.49,26,724.00   Total income:     Rs.49,26,724.00   R/O Rs.49,26,720.00 4. On first appeal, the Ld. CIT(A) held that the interest income from the said deposits derived by the assessee was due to placing of margin money with the Stock Exchange so as to enable the assessee to get exposure to trade on the NSE platform in accordance with their risk management policy and so dealing in securities and interest on FDs were integral part of the securities business. Accordingly, he directed the Ld. AO to assess the loss arising from dealing in securities as well as interest income from FDs under profits from speculative business and allowed the appeal of asses....

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....and sale of such shares." Hence, we find that in any case the provisions of Explanation to Sec. 73 of the Act could not be made applicable in the facts and circumstances. The Ld. AR also placed reliance on the decision of the jurisdictional High Court in the case of ITA No. 196 of 1999, CIT Vs. Middleton Investment & Trading dated 15.01.2014, wherein it has been held as under: "The Court : The income of the assessee arising from different heads was as follows: I. Loss in the purchase and sale of shares (-) Rs. 10,83,091/- including interest liability attributable to it. II. Income from the business of granting (+) Rs. 2,10,218/- loans, advances etc. III. Short term capital gains in sale of shares (+) R....

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....as taken: "The ambit of sub-section (1) of section 73 is only to prohibit the setting off of a loss which has resulted from a speculation business, save and except against the profits and gains of another speculation business. In order to determine whether the exception that is carved out by the Explanation applies, the Legislature has first mandated a computation of the gross total income of the company. The words "consists mainly" are indicative of the fact that the Legislature had in its contemplation that the gross total income consists predominantly of income from the four heads that are referred to therein. Obviously, in computing the gross total income the normal provisions of the Act must be applied and it is only thereafte....