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Issues:
1. Pro rata allocation of expenditure relating to speculation business. Analysis: The appeal filed by the revenue challenges the order of CIT(A)-IV, Mumbai for assessment year 1996-97 regarding the deletion of pro rata allocation of expenditure related to speculation business. The Assessing Officer increased the declared loss in share trading transactions by the assessee, attributing establishment expenses to trading of shares on a pro rata basis. This resulted in an increased loss treated as speculation loss under Explanation to section 73. The CIT(A) disagreed, stating that the provisions of section 73 deem business with share trading as speculative, but do not mandate allocation of expenses to such transactions. He emphasized the plain meaning of the Act's language and cited relevant case law to support his decision. The revenue contended that the CIT(A) erred in isolating the Explanation to section 73 and ignoring the basic provisions of section 73. They argued that the case law cited by the CIT(A) was not applicable as it pertained to the Wealth-tax Act. On the other hand, the assessee's counsel argued that the transactions were deemed speculative due to the Explanation to section 73, which should not extend to apportioning expenses. The counsel relied on case law emphasizing that expenses should not be apportioned in cases of indivisible business. After considering the arguments, the tribunal noted that the sale and purchase transactions of shares by the assessee fell under the Explanation to section 73, deeming them speculative business. Section 73(1) requires loss computation for speculative business, including expenses related to share transactions. The tribunal emphasized that the explanation should be read in conjunction with the basic provision of section 73(1) to compute loss for speculation business. Therefore, the tribunal vacated the CIT(A)'s findings and upheld the Assessing Officer's order, allowing the appeal filed by the revenue.
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