2017 (8) TMI 1450

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....s of Rs. 11,87,934/- is covered by the explanation to section 73 of the IT Act 1961. The Commissioner of Income tax Appeals is not justified in doing so and thus the addition be deleted. 3. The appellant craves leave to produce additional evidences in terms of Rule 29 of the Income Tax (Appellate Tribunal)Rules 1963 4. The appellant craves leave to press new, additional grounds of appeal or modify, withdraw any of the above grounds at the time of hearing of the appeal." Shri Miraj D Shah Ld. Advocate appeared on behalf of assessee and Shri Banibrata Dutta, Ld. Departmental Representative represented on behalf of Revenue. 2. Solitary issue raised by assessee in this appeal is that Ld. CIT(A) erred in treating the loss of Rs.11,87,934/- as speculation in nature in pursuant to Explanation to Section 73 of the Act. 3. Briefly stated facts are that assessee is a private limited company and engaged in business of investment and financing. The assessee in the year under consideration has shown following income in its profit and loss account:- Sl.No. Particulars Amount (Rs) 1. Profit from share trading 83,22,066 2. Loss from share trading ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....ces is higher than the income under the head business income or not. The assessee claims that the income under the head other sources is higher than the income under the head business income and accordingly they do not fall within the purview of the explanation to section 73. The computation of income of the assessee, as per the assessee, is as follows: Income from shares (business income)   Share loss (Rs.11,87,934) Interest Rs.6,65,459 Net business income form shares Rs.5,22,475 Income from interest &consultancy (under head income from other sources) as per assessee Rs.7,20,000 The assessee has argued that as the income from the head other sources (Rs.720000/-) exceeds the income under the head business income (Rs.522475/-) they are not hit by the provisions of explanation to section 73. The assessee in para 15 of his written submission has stated that the computation of income made by the AO in the assessment order is as follows: Income from business     Income from shares (Rs.11,87,934)   Income from Consultancy Rs.6,65,459   Income under the head income from business A ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....l before us. 5. Before us Ld. AR for the assessee filed paper book which is running pages 1 to 76 and submitted that transactions of purchase and sale of shares are to be held as speculation business income only if it hit by Explanation to Section 73 of the Act. The implication of Explanation is that if an assessee incurs a speculation loss in a manner deemed in the Explanation such loss shall not be set off except against the profit and gain, if any, of another speculation business. However there are two exceptions provided under Explanation to Section 73 of the Act. The first exception provided in Explanation to Section 73 of the Act is that in case 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" then Explanation to Section 73 of the Act will not be applied. 5.1 Second exception is that the provision of Explanation to Section 73 of the Act will not be applied to a company if the principal business of which is the business of trading in shares or banking are granting of loan and advances. Ld. AR further submitted that principal business h....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....2005-06 to 2009-10. However, the income from consultancy for Rs.7.20 lakh was shown only in the year under consideration. Similarly, the interest income has not been shown every year by the assessee. 6.1 In view of the above, it can be concluded that principal business of the assessee is of share trading and granting of loan and therefore it is outside the purview of provision of Explanation to Section 73 of the Act. Now, it is well settled that the amendment under the Explanation to Section 73 of the Act for treating the principal business of share trading under exception category with retrospective effect in nature as held by the Co-ordinate Bench of this Tribunal in the case of ITO Vs. ATN International Limited in ITA Nos. 1531 & 1532/Kol/2011. The relevant extract of the order is reproduced below:- "3.7. We have heard the rival submissions. We hold that it is not in dispute that the principal business of the assessee is trading in shares. We find that the amendment was brought by Finance Act 2014 w.e.f. 1.4.2015 by insertion of the expression - principal business of which is the business of 'trading in shares' or banking ............ in Explanation to Sectio....