2026 (7) TMI 884

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....order dated 18.12.2017 passed u/s 143(3) of the Act pertaining to Assessment Year 2015-16. 2. Brief facts of the case are that the assessee company engaged in the business of real estate and e-filed its return of income, declaring total income of INR 8,20,41,380/- on 30.09.2015. The case was selected for scrutiny under CASS and the assessment was completed in terms of order passed u/s 143(3) of the Act dated 18.12.2017 wherein total income was assessed at INR 8,64,72,720/- by making disallowance of INR 44,21,431/- as speculative loss suffered due to transaction in shares and securities and derivatives by invoking the Explanation to section 73(4) of the Act. Further, disallowance of INR 9,910/- was made u/s 14A of the Act. 3. Against t....

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....nts of Hon'ble Delhi High Court in the case of CIT vs DLF Commercial Developers Ltd., AO has disallowed the said loss being speculative in nature. The claim of the assessee was that out of the total brokerage claimed at INR 8,24,374/- in the Profit & Loss a/c, a sum of INR 1,61,724/- relates to the brokerage paid for share trading activity. Likewise, Service Tax claimed at INR 9,81,534/- includes a sum of INR 1,61,724/- in respect of F&O segment. 7. As per Ld. AR, the trading in derivatives (F&O Segment) is not speculative transactions as per the provisions of section 43(5) of the Act and therefore, the same cannot be considered as part of share trading business as referred in Explanation to section 73(4) of the Act. Before going further....

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....nation.-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 ^13[the principal business of which is the business of trading in shares or 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. As could be seen from the aforesaid provision, the loss incurred from the purchase an....

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....R 34,21,431/- claimed by the assessee, a sum of INR 9,11,932/- being loss from purchase and sale of shares which is held as speculative loss and balance loss is hereby, treated as business loss. Regarding the disallowance of INR 10 Lakhs made out of various expenses holding the same as related to share trading activity, it is observed that the AO has not given any basis for making such apportioned and therefore, in our opinion, a sum of INR 1.00 Lakh would be fair and reasonable as related to share trading activity. Accordingly, as against total disallowance of INR 44,21,431/-, a sum of INR 10,11,932/- [INR 9,11,932/- + INR 1.00 Lakh] is hereby, confirmed and balance addition is deleted. Thus, Grounds of appeal Nos. 1 & 2 raised by the asse....