TaxTMI 
TaxTMI 
2019 (7) TMI 1037
X X X X Extracts X X X X
X X X X Extracts X X X X
....or scrutiny and notice under Section 143(2) was issued to the assessee on 04.10.2004. A revised return was filed on 31.03.2005 by the assessee re-computing the loss at Rs. 3,11,43,326/- and claiming a refund of Rs. 1,72,011/-. 3. While completing the assessment, the A.O. resorting to the Explanation to Section 73 of the Act, treated the returned loss of Rs. 3,19,13,970/- as speculation loss, as the assessee is a non-banking company whose income consists mainly of"income from business". The assessee's business consists of trading in shares of other companies. The speculation loss, according to the A.O., could be set off only as per the provisions of sub-sections (1) to (4) of Section 73 of the Act. 4. The assessee filed an appeal before the Commissioner of Income Tax (Appeals), who vide order dated 19.10.2006 allowed the appeal and directed the A.O. not to treat the loss as speculation loss. The reasoning was that, as per CBDT circular No.204 dated 24.09.1976, non-banking finance companies have been taken out of the scope of application of Section 73 and hence trading loss of such companies shall not be treated as speculation loss. The Revenue preferred an appeal before th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ss of a company (other than a company whose gross total income consists mainly of income which is chargeable under the heads "Interest on securities", "Income from house property", "Capital gains" and "Income from other sources", or a company the principal business of which is the business of banking or the granting of loans and advances) consists in the purchase and sale of shares of other companies, such company shall, for the purposes of this section, 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." 8. The argument of the learned Counsel for the Revenue is that by virtue of the afore-cited Explanation, which is in the nature of a deeming provision, the loss of the assessee company having been occasioned in the business of buying and selling shares of other companies, it has to be treated as a speculation loss in view of the Explanation to Section 73. On the other hand, the argument of the learned Counsel for the assessee is that the assessee-company is a non-banking financial company, engaged mainly in the trading of shares. The purpose of the Explanation was to curb the device resorted t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rom other sources" and, as such the Explanation to Section 73 is clearly applicable. 12. We find from the aforesaid decisions that in similar instances where the assessees carried on speculative business, like dealing in shares, when suffered losses, the claim of set off against the income from sources other than the profits and gains of business or profession, was found to be not permissible going by Section 73. 13. We specifically refer to the facts in Park View Properties P. Ltd., one of the latest decisions cited by the learned Counsel for the Revenue. Therein, the assessee had income from other sources of Rs. 5,73,701/- and business income of Rs. 3,33,670/-. The Tribunal found that since the income from other sources was more, the exemption as applicable under Explanation to Section 73 would apply. Hence, the business losses, though loss from speculative business, the same could be set off against income from other sources. However, the Division Bench of the Calcutta High Court found that there was a loss in the share dealing account, of Rs. 8,98,799/-, and this being negative income, the same has to be taken for the purposes of the Explanation to Section 73. The said fi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of shares of other companies., on which business substantial loss accrued over the years. There is no doubt that the assessee-Company is engaged in a speculative business. Hence its losses can only be set off against speculative business income unless the gross total income of the assessee is under heads of income, other than "income from profits and gains of business or profession". 16. In the present case for the subject assessment year the assessee had an income from other sources, which was a refund of income tax. It is against this refund of income tax that the assessee claims set off of business loss. If we accept the contention raised by the learned Counsel for the assessee, then the exception as provided in the Explanation in Section 73 has to be understood as being applied to each of the assessment years where there is a change in the gross total income from any other sources other than the profits and gains arising from business or profession. 17. The question of chargeability for the purpose of exemption as argued by the learned Counsel for the assessee even if found to be acceptable, it has to be held that though the negative income would be chargeable; for reaso....