TaxTMI 
TaxTMI 
TaxTMI 
2019 (5) TMI 39
X X X X Extracts X X X X
X X X X Extracts X X X X
.... shares against their business income. Now, what is to be taken as the principal business of the assessee, is a purely technical matter. It involves principles in the field of general law, corporate law, accountancy, revenue law and so on. In this case, the assessee is a limited company. It has a memorandum of association. It has to undergo audit. It is required to file its balance-sheet and profit and loss account with the Registrar of companies. It also files its income tax return. No authority has been shown to us which would give a guidance to determine the principal business of the assessee for the purpose of taking benefit under Section 73 of the Income Tax Act, 1961. Is the principal business of the assessee to be determined on the basis of the businesses mentioned in its memorandum of association? Whether turnover of the assessee is an indication of its principal business? Suppose an assessee makes substantial capital expenditure in a year for promotion of a particular business which it claims to be its principal business but its turnover in that year is much less than the turnover from other business, could the assessee claim the former business to be its principal....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ding that neither of the exceptions provided in Explanation to Section 73 of the Act were applicable to the case of the assessee. The learned CIT (Appeals) allowed the appeal of the assessee by holding that the case of the assessee was covered by the exceptions provided in Explanation to 73 of the Indian Tax Act, 1961 and the loss of Rs. 1.48 crore suffered by the assessee in purchase and sale of shares is to be held as business loss and should be allowed to be set off as business loss. Feeling aggrieved by the order of the CIT (Appeals) revenue preferred appeal before the learned Tribunal which allowed the appeal of the revenue and reversed the order of CIT (Appeals) and restored the order of the Assessing Officer on this issue against which the assessee has preferred the instant appeal Assessee/appellant contends that impugned order of the Tribunal is erroneous for the reason that the assessing officer himself in assessment order has held that the deployment of funds in the business of granting of loans and advances was Rs. 13.03 crores whereas it was only Rs. 2.33 crores in shares dealing as such granting of loans and advances in the instant case should have been treated as ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ns, 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 the following assessment year, and- (i) it shall be set off against the profits and gains, if any, of any speculation business carried on by him assessably for that assessment year; and (ii) if the loss cannot be wholly so set off, the amount of loss not so set off shall be carried forward to the following assessment year and so on. (3) In respect of allowance on account of depreciation or capital expenditure on scientific research, the provisions of sub-section (20 of section 72 shall apply in relation to speculation business as they apply in relation to any other business. (4) No loss shall be carried forward under this section for more than four assessment years immediately succeeding the assessment year for which the loss was first computed. Explanation.- Where any part of th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s computed in respect of speculation business carried on by an assessee will not be set off except against the profits or gains, if any, of another speculation business. Further, where any loss, computed in respect of a speculation business for an assessment year is not wholly set off in the above manner in the said year, the excess shall be allowed to be carried forward to the following assessment year and set off against the speculation profits, if any, in that year, and so on. The amending Act has added an Explanation to section 73 to provide that the business of purchase and sale of shares by companies which are not investment or banking companies or companies carrying on business of granting loans or advances will be treated on the same footing as a speculation business. Thus, in the case of the aforesaid companies, the losses from share dealings will now be set off any against profits or gains of a speculation business. Where any such loss for an assessment year is not wholly set off against profits from a speculation business, the excess will be carried forward to the following assessment year and set off against profits, if any, from any speculation business. 19.2 The ob....
X X X X Extracts X X X X
X X X X Extracts X X X X
....court that principal business of the assessee was of granting of loans and the assessee came within the exception to the Explanation under Section 73 of the Income Tax Act, 1961. Revenue relied upon the decision of this court in the case of Aryasthan Corporation Ltd. (supra) where it has been held that the loss in shares dealing which is negative income was much more than the income under other headings as such shares dealing activity was treated as principal business and as such fact of the said case is different from the present case. Revenue relied on the decision of this Court in Paharpur Cooling Towers Ltd. (supra) in that case there was specific finding by all the authorities below and this court upheld the said finding and it would appear that the facts of the said case as recorded below by this Court is different from the present case: "We are of the view that this case on factual aspect as recorded by the learned Tribunal and other authorities admittedly the sale of shares has been effected by physical delivery of shares. Therefore, the assessee-company cannot get the benefit of set off or carry forward of speculation loss as rightly held by all the authorities." ....