TaxTMI 
TaxTMI 
2016 (9) TMI 214
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....aid Explanation ? 1.1 Similarly, being aggrieved and dissatisfied with the impugned judgment and order dated 08.06.2007 passed by the Income Tax Appellate Tribunal, Ahmedabad Bench 'A' (hereinafter referred to as ITAT) in ITA No. 388/Ahd/2007 for the assessment year 2001-02, the assessee has preferred Tax Appeal No. 1644 of 2008 for consideration of the following substantial question of law: Whether the Appellate Tribunal is right in law and on facts in reversing the order of the CIT(A) and thereby cancelling the penalty levied under Section 271(1)(c)? 2. The assessee is a dealer in chemicals as also in shares. The assessee applied in the Public Issue of certain companies and was allotted shares which it eventually sold and in the process suffered loss. The Assessing Officer rejected the contention of the assessee that the application of shares from the primary market and loss incurred on the sale of such shares does not fall within the purview of being categorized as speculated loss under the provisions of Explanation to Section 73 of the Act. On appeal before the ITAT, by impugned judgment and order, dismissed the appeal filed by the assessee. 2.1 So far as Tax Appeal No. ....
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.... 'transfer' of shares and that the allotment by the assessee of all the rights shares to only seven out of 27 shareholders was not 'transfer' and section 4(1)(a) was not applicable. 3.2 Referring to the aforesaid decisions, Mr. Shah has submitted that if the provision is interpreted keeping the object in mind, the provision will not apply to these transactions and even if the rule of literal interpretation is to be adopted even then the provision will not apply because allotment in Public Issue of shares is not purchase as held by the Apex Court because it is well established that the company cannot trade in its own shares. He submitted that even if the provision is capable of two interpretations, one in favour of the assessee must be adopted bearing in mind the well settled rule of interpretation of taxing statutes. 3.3 So far as Tax Appeal No. 1644 of 2008 is concerned, Mr. Shah submitted that the Tribunal has rightly cancelled the levy of penalty. He submitted that the CIT(A) has wrongly confirmed the levy of penalty. 4. Mr. Manish Bhatt, learned Senior Counsel has appeared with Ms. Mauna Bhatt, learned advocate on behalf of the Department. He has drawn the attention of this ....
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....hat "When the words of a section are clear, but its scope is sought to be curtailed by construction, the approach suggested by Lord Coke in Heydon's case [1584] 3 Rep. 7B yields better results. To arrive at the real meaning, it is always necessary to get an exact conception of the aim, scope and object of the whole Act; to consider, according to Lord Cole; 1. what was the law before the Act was passed; 2. what was the mischief or defect for which the law had not provided 3. What remedy Parliament has appointed; 4 the reason of the remedy. In Sevantilal Maneklal Sheth 68 ITR 503 (SC), the Supreme Court again observed that it is a sound rule of interpretation that a statute should be so construed as to prevent the mischief and to advance the remedy according to the true intention of the makers of the statute. In K.P. Varghese 131 ITR 597 (SC) also it was observed that "The task of interpretation of a statutory enactment is not a mechanical task. It is more than a mere reading or mathematical formula because few words possess the precision of mathematical symbols. It is an attempt to discover the intent of the Legislature from the language used by it and it must always be remembered t....
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....o advance of the debt or loan' and 'because at the time when property became part of creditors' resources there must be some nexus between the resources and the consideration for the debt. Similarly in the 2nd case the wide language in Section 52(2) was giving rise to tax an item which was not income or even receipt and therefore outside the legislative powers of the Parliament and also violative of fundamental rights enshrined under article 19(1)(f) of the Constitution. There is nothing of that sort in this case. There is no ambiguity also in the language used. Putting the share dealing transactions in one category is a reasonable classification and loss arising therefrom are put in one category of 'speculative loss' entitled to same treatment as other losses except that set off thereof is restricted to income of that category. 27. We may examine this issue from a different angle. What the Explanation provide is the any business of a company consists of purchase and sales of shares of another company, therefore we have to see is whether business is of purchase and sale of shares and not what is the nature and mode of such purchase. The assessee does not dispute that on allotmen....
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....d to be given its common meaning viz. buy for a price or equivalent of price by payment in kind or adjustment towards a debt or for other monetary consideration and that each release in this case was a transfer of the releasor's share for consideration to the releasee and the transferee, the assessee, "purchased" the share of each of his brothers and the assessee was, therefore, entitled to the relief under S. 54(1). (III) State of Karnataka and others vs. Sri Chamundeswari Sugar Limited reported in [2008] 7 SCC 469 wherein para 16 reads as under: "16. Normal meaning of the word 'purchase' is acquisition for money or for any consideration. That is the primary meaning. In Concise Oxford Dictionary, apart from the two meanings "buy, acquire", another meaning given to the word "purchase" is "procure". The word "procure" consists of much wider import than the word "purchase". In the same dictionary, the word "procure" has been mentioned the meaning as "obtained by care or effort acquire". Purchase is thus a word of restricted meaning than the word "procure". While considering a taxing statute which deals with income from business the word "purchase" will therefore, have to b....
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....t even the acquisition of shares by allotment on application in Public Issue and their eventual sale will be speculation business. Section 73 of the Income Tax Act, 1961 deals with carry forward and set off losses from speculation business. Explanation to Section 73 is a deeming provision wherein if specified conditions are satisfied, purchase and sale of shares are deemed speculation activities. This explanation becomes very important now-a-days in view of more and more NBFC activities. In this context it shall be relevant to go through Section 73 of the Act and the Explanation thereto and the same reads as under: "73. Losses in speculation business (1) 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. (2) Where for any assessment year any loss computed in respect of a speculation business has not been wholly set off under sub- section (1), so much of the loss as is not so set off or the whole loss where the assessee had no income from any other speculation business, shall, subject to the other provisions of this Chapter, be carried forward to ....
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....d that there is a vital difference between tax planning and tax evasion. According to the learned counsel, it is perfectly legitimate and permissible for an assessee to so arrange his affairs with a view to reduce its tax liability and such tax planning cannot be equated with tax evasion. In this connection, learned counsel submitted that the transaction in question was not sham or fictitious but real and it was given effect to. Moreover, it was contended that the stand taken by the Department, in this case, was conflicting inasmuch as according to the A.O. what was intended to be evaded was incometax by the Directors of the appellant-company whereas, according to the CIT(A), the exercise undertaken by the appellant-company was to evade wealth tax. Learned counsel submitted in the alternative that even assuming whilst denying that there was an intention to evade income tax or wealth tax, the correct course open to the Department was to include the income or wealth in the income tax or wealth tax assessment of the concerned assessee. For the aforestated reasons, learned counsel submitted that the High Court should not have interfered with the decision of the Tribunal. 7. At the o....