TaxTMI 
TaxTMI 
2002 (9) TMI 253
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....was also received by the assessee in the preceding year. The Assessing Officer considering the fact that the loss suffered by the assessee was mainly on account of purchase and sale of shares, invoked Explanation to section 73 of the Act and assessed speculation loss at Rs. 69,20,855 which was allowed to be carried forward and set off against speculation profit in the subsequent years. 3. The assessee appealed to the CIT(A) and claimed that Explanation to section 73 was inapplicable to the assessee-company as it was engaged mainly in the activity of granting loans and advances. The CIT(A) has considered the claim of the assessee with reference to the balance sheet and decided the issue in favour of the assessee. In arriving at his decision, the CIT(A) has pointed out that the paid up capital of the company is Rs. 89.50 lacs and had borrowed funds of Rs. 2.22 crores. The total capital employed was worked out at Rs. 3.12 crores. Against this, the amount kept in investments was Rs. 2.71 crores. Loans and advances granted was found at Rs. 89.96 lakhs. It was, accordingly, held by the CIT(A) that the company's principal business is investment and granting of loans and advances. The L....
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....alls in the excluded category under Explanation to section 73. Since the controversy revolves around the interpretation of Explanation to section 73, it will be useful to reproduce the same. "73(1) Any loss, computed in respect of a speculation business carried on by the assessee shall not be set off except against profits and gains, if any, of another speculation business. (2) ........................ (3) ...................... (4) ...................... 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 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." 6. It is pertinent to mention that prior to 1-4-1988, the Explanation was applicable to....
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....s to fall on the meaning of gross total income with reference to the context. One may have a look at any of the Income-tax Return Forms prescribed under the Rules and it will not be difficult to appreciate the meaning of the gross total income in the light of the provisions of the Income-tax Act notwithstanding the fact that it may not be defined specifically for any purposes other than Chapter VIA. As per the prescribed Form of Return of Income, the income from various heads is to be disclosed and the sum total of the income from various sources will constitute the gross total income. Thereafter deductions under Chapter VIA are to be reduced in order to find out the total income which is taxable. Agricultural income is to be shown separately and, therefore, this may not be included in the gross total income. It may incidentally be pointed out that under section 2(45), total income is defined to mean the total amount of income referred to in section 5 computed in the manner laid down in the Act. Thus, taking the definition of the total income into consideration read with the Income-tax Returns Forms as per the rules, it will not be difficult to appreciate that the meaning of the gr....
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....bsp; Profit & Loss Account for the vear ended 31st March, 1997 Income Rs. Rs. Rs. Profit on sale of Investments Dividend (Gross) (Tax deduction at source Rs. 79413 Previous year Rs. 39,122) 3,41,257 Interest (Gross) (Tax deducted at source Rs. 100 Previous year Rs. 101) 11,880 Closing stock of shares  ....