TaxTMI 
TaxTMI 
TaxTMI 
2023 (6) TMI 401
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....d income by the appellant, in spite of the fact that appellant itself has disallowed Rs. 1,83,029/- u/s 14A of the Income Tax Act. 3. The Commissioner of Income tax (Appeals) has further erred in confirming the order of the Assessing Officer that ignored the applicability of Sec. 43(5) of Income tax Act and applying the provisions of sec. 73 of Income tax Act to the arbitrage/jobbing transactions, deeming the cash market delivery based trading loss in arbitrage activity as speculative loss. 4. The Commissioner of Income Tax (Appeals) has further erred in sustaining the order of the Assessing Officer which is not justified in treating the loss in cash market delivery based transactions of arbitrage activity of Rs. 3,85,05,712/- as speculative loss. 5. The Commissioner of Income tax (Appeals) has further erred in confirming the order of the Assessing Officer which is not justified in making addition of Rs. 56,64,235/- treating the same as speculation loss u/s 73 of Income tax Act. 6. For these grounds and such other grounds that may be adduced at the time of hearing, the order of the Commissioner of Income tax (Appeals) confirming the order of the Assessing Officer may be rev....
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....m derivative trading, in terms of Clause (d) of Sec. 43(5) was non-speculative in nature. Since the assessee was engaged in the business of share trading, the explanation to Section 73 would apply which provide that any income or loss arising from such transactions is deemed to be speculative in nature. The said explanation read as under:- 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 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. Therefore, the losses thus arising could be set-off only from speculative income only whereas the assessee has set-off share trading losses against non-speculative income from derivative trading which is impermissible. 3.3 The asse....
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....assessee, the entire transaction of purchase and sale of securities constitutes arbitrage & jobbing transactions as a whole and hence these transactions are outside the purview of the speculative transaction. The effect of explanation to Sec.73 would be that the income of all companies which are either trading or manufacturing and deriving income from sale and purchase of shares would be treated as speculative income (profit) notwithstanding the fact that sale and purchase took place on actual delivery basis. Further, the Explanation 2 to Section 28 of the act provides that where speculative transactions carried on by an assessee are of such a nature as to constitute a business, the business i.e., speculation business shall be deemed to be distinct and separate from any other business. However, the term 'speculation' has not been defined u/s. 28. The term speculative transactions have been defined in Section 43(5) which provides a special exception to certain transactions, amongst which is the arbitrage / jobbing income. The Sec. 73(1) provides that any loss of speculative business shall not be set off except against profits and gains of another speculation business. The explanatio....
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....the assessee is rejected and the F & O arbitrage income of Rs. 5.81 Crores is treated as speculative income only. The action of the Assessing Officer in not setting off the F& O arbitrage income against delivery based share trading loss is upheld. The grounds of appeal on this issue are rejected. Aggrieved, the assessee is in further appeal before us. Our findings and Adjudication 4. From the given factual matrix, it emerges that the assessee has incurred delivery based share trading loss of Rs. 385.05 Lacs. The assessee claimed the set-off of the same against F & O Arbitrage Income of Rs. 581.37 Lacs. The Ld. AO has denied the same by invoking the provisions of Sec.73. It could be seen that the assessee's whole business is dealing in shares and securities. The entire income of Rs. 1799.10 Lacs has resulted from the jobbing transactions carried out by the assessee. Overall, there is no loss and therefore, the provisions of Section 73, in our consider opinion, could not be applied to the assessee since these provisions would apply only if there was an overall loss in this business segment, the set-off of which was sought to be claimed by the assessee against other incomes. Procee....