TaxTMI 
TaxTMI 
2009 (3) TMI 35
X X X X Extracts X X X X
X X X X Extracts X X X X
....Section 73 of the Income Tax Act, 1961. In respect of the said disallowance and on some other aspects, the assessee preferred an Appeal before C.I.T. (A). C.I.T. (A) by its order was pleased to observe that the business of the appellant consists of trading and investment in shares, debentures, bonds, mutual funds and other securities pursuant to its Memorandum of Association. The Tribunal considering the arguments was pleased to place reliance on the order of the Delhi Bench in Aman Portofolio Pvt. Ltd., 92 ITD 324 (Delhi) as also the clarification issued by C.B.T.D.'s Circular No.204 dated 24^th July, 1976 and held that the A.O. was not justified to treat the loss in shares as speculative loss and accordingly the disallowance on that count....
X X X X Extracts X X X X
X X X X Extracts X X X X
....has to be read with Circular No.204 and if so read it would be clear that the object of the provisions is to curb the device sometimes resorted to, by business houses controlling groups of companies to manipulate and reduce the taxable income of companies under their control. It is submitted that it is not the contention of the Revenue that the Assessee controls the group companies and the transactions were done to manipulate and reduce the taxable income of the companies under their control. 4. On the other hand on behalf of Revenue, learned Counsel submits that the language of the Explanation to Section 73 is clear. It is further submitted that no doubt the Circular has been issued. However, it is for the Court to decide the true effec....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ll not be set off except against profits and gains, if any, if another speculation business. (2) ........ (3) ........ (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 the business of a company (other than a company whose gross total income consists mainly of income which is chargeable under the heads "Interest of 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 compa....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... as under:- "The object of this provision is to curb the device sometimes resorted to by business houses controlling groups of companies to manipulate and reduce the taxable income of companies under their control." It appears from this paragraph in the explanatory note in respect of the amending Act that the argument advanced on behalf of the assessee by their Counsel may merit some consideration. In our opinion, however, a gainful reading of paragraphs 19.1 and 19.2 read with language of the Explanation would not bear out the submission as made on behalf of the Assessee. Para.19.1 as we have noted earlier does not refer to group companies, but refers to companies dealing with shares. It is in that context para.19.2 may be cons....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r scrips." 12. Our attention is also invited then to Section 28 Explanation 2 which reads as under:- "Where speculative transactions carried on by an assessee are of such a nature as to constitute a business, the business (hereinafter referred to as "speculation business") shall be deemed to be distinct and separate from any other business." Explanation 2, to Section 28, therefore, treats the business in respect of speculative transactions to be distinct and separate from any other business. Section 43(5) holds those transactions to be speculation respect of which a settlement is otherwise periodically or settled other than by delivery or transfer of the commodity or scrips. Reading these provisions learned Counsel subm....