TaxTMI 
TaxTMI 
2022 (9) TMI 700
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....after referred to as Act) dated 26/12/2016 by the Ld. Asst. Commissioner of Income Tax-4(2)(1), Mumbai (hereinafter referred to as Ld. AO). 2. The only issue to be decided in this appeal is as to whether the Ld. CIT(A) was justified in treating the share trading loss as not speculative loss on the ground that provisions of Explanation to Section 73 of the Act are not applicable to the assessee in the facts and circumstances of the instant case. 3. We have heard the rival submissions and perused the materials available on record. We find that the assessee is engaged in the business of share broking. The return of income for the Asst Year 2014-15 was filed by the assessee on 26.11.2014 declaring total income of Rs. 1,89,55,910/-. The Ld....
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.... its clients for executing the transactions on behalf of them. Whereas, as a trader in shares, the role of the assessee is distinctly different from that of share broker and accordingly the entire profit or loss arising out of such transactions would come to the assessee. 3.2. The Ld. AO observed that transactions carried out in the capacity of share broker would also fall within the purview of provisions of Explanation to Section 73 of the Act. The Ld. AO in this regard placed reliance on the decision of Hon'ble Supreme Court in the case of CIT vs. Pangal Vittal Nair & Co reported in 74 ITR 754 (SC); decisions of Hon'ble Calcutta High Court in the case of Park View Properties P. Ltd. reported in 261 ITR 473 (Cal) and Eastern Avi....
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....other sources of Rs. 1,21,75,044/- which is much more than income from business. Accordingly, it was appreciated by the Ld. CIT(A) that the assessee's case falls under the exception clause provided in Explanation to Section 73 of the Act. Aggrieved, the revenue is in appeal before us. 3.4. For the sake of convenience, the provisions of Explanation to Section 73 of the Act as it stood at the relevant time are reproduced hereunder:- Section 73 - Losses in Speculation Business Explanation.-Where any part of the business of a company (^43[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 ....
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....g on a speculation business to the extent to which the business consists of the purchase and sales of such shares. The deeming fiction applies only to a company and the provision makes it clear that the deeming fixation extends only for the purposes of the section. The bracketed portion of the explanation, however carves out an exception. The exception is that the provision of the explanation shall not apply to 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 whose principal business is of banking or the granting of loans and advances. 7. The submission which has been u....
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....nst the profits and gains of any other business. Consequently, a loss which has arisen on account of speculation business can be set off only against the profits and gains of another speculation business. However, for Sub-Section (1) of Section 73 to apply the loss must arise in relation to a speculation business. The explanation provides a deeming definition of when a company is deemed to be carrying on a speculation business. If, the submission of the Revenue is accepted, it would lead to an incongruous situation, where in determining as to whether a company is carrying on a speculation business within the meaning of the explanation, sub-section (1) of Section 73 is applied in the first instance. This would in our view not be permissible ....
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.... under the head of profits and gains of business or profession as well. Both the income from service charges in the amount of Rs. 2.25 crores and the loss in share trading of Rs. 2.23 crores, would have to be taken into account in computing the income under that head, both being sources under the same head. The assessee had a dividend income of Rs. 4.7 lacs (income from other sources). The Tribunal was justified, in coming to the conclusion that the assessee fell within the purview of the exception carved out in the explanation to Section 73 and that consequently the assessee would not be deemed to be carrying on a speculation business for the purpose of Sec. 73(1). 10. The view, which we have taken, also accords with the judgments....