TaxTMI 
TaxTMI 
1991 (1) TMI 26
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.... is 1978-79. The assessee-company purchased 12,070 shares of another company called "P. G. Textile Mills Ltd., Baroda", in April and September, 1976, at the rate of Rs. 100 per share ; but subsequently sold them to one N. L. Rungta of Bangalore and M/s. Rajesh Engineering Company Pvt. Ltd., Bangalore, at the rate of Rs. 10 per share. These sales were in April and August, 1977. In this process, the assessee-company sustained a loss of Rs. 10,86,300. This the assessee claimed as a "short-term capital loss". The assessing authority held that, as per the memorandum of association of the assessee-company, its objects included dealing in shares. Therefore, he treated the loss sustained by the assessee-company as speculation loss within the meani....
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....s is whether the purchase of shares in M/s. P. G. Textile Mills Ltd. amounts to an investment or is a speculative venture." After referring to the losses sustained by the Baroda company during the years 1972 to 1977, the Tribunal observed that the assessee knew this fact all along and held: " It is difficult for us to believe that the assessee realised that its investment was bad and, therefore, it had to be got rid of at the earliest opportunity, only after purchasing the shares. The facts clearly indicate that the purchase of shares is a speculative venture." The Tribunal further observed that, strictly speaking, although the clause in the memorandum of association comes under "objects incidental or ancillary to the attainment of the m....
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....lopmental activities. In such a situation, it may not be strictly as an investment or as a dealer, but as a person interested in rescuing another person who is closely related to the former. The Commissioner of Income-tax (Appeals) has found that the assessee-company was interested in the Baroda company and obviously purchased the shares to help the said Baroda company to modernise its plant. Having realised that it was not possible to develop the said company, immediately the assessee-company sold the same after about a year. The short question for us is the interpretation of the Explanation to section 73 because the question referred to us is entirely based on the Explanation to section 73. The relevant provision reads thus : "73. Losse....
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....all within the definition of "business". Learned counsel referred to the definition in section 2(13) wherein "business" includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture. It is to be noticed that any kind of venture will not fall within this inclusive definition. The venture or the adventure will have to be in the nature of trade, commerce or manufacture. Basically, the concept of business involves a frequent activity of a particular nature. An isolated activity is opposed to the concept of business. As observed by an English court (extracted from p. 114 of Kanga and Palkhivala's The Law and Practice of Income Tax-Vol. I, 7th edition). "A single plunge may be enough prov....
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.... groundnut oil and, in that connection, it had entered into a number of contracts for the purchase as well as sale of the aforesaid commodities. In respect of a small portion of the contract, delivery did not take place and, for reasons beyond the control of the assessee, the assessee committed breach of the contract. While considering the facts, the court also considered the claim under section 73. At page 765, the Bench observed, after referring to section 73(1) and Explanation 2 to section 28, thus : "In our opinion, it is necessary to examine the nature and the course of speculative transactions in any given year in order to determine whether the assessee is carrying on speculation business. Section 73(1) of the Act provides that any l....
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....he enters into a contract of sale, he simultaneously enters into one or more contracts to purchase the same quantity before the vaida day. The result of such dealings, when the sale and purchase are to and from the same person, has the effect of cancelling the contracts leaving only differences to be paid (vide Tod v. Lakhmidas Purshotamdas [1892] ILR 16 Bom 441, Perosha Cursetji Parakh v. Manekji Dossabhai Watcha [1898] ILR 22 Bom 899 and Sassoon v. Tokersey Jadhawjee [1904] ILR 28 Bom 616." Again at page 766, the Bench concluded: "What is required for speculation business is that the course of speculative transactions carried on by an assessee is of such a nature as to constitute a business. It is, therefore, necessary in each case to e....