2006 (1) TMI 617 - AT - Income Tax

Summary

Issues:
Allowance of set off of speculation loss against business income.

Analysis:
The appeal was filed by the revenue against the order of the CIT(A) directing to allow set off of speculation loss of Rs. 6,57,195 from business income. The revenue contended that the transaction in question was of a speculative nature as the assessee sold 41,200 shares without taking delivery, which falls under the definition of speculative transaction as per section 43(5). The Assessing Officer disallowed the speculation loss as no evidence of share delivery was provided. The CIT(A) deleted the addition without discussing the relevant legal provisions. The Appellate Tribunal found that the shares were sold before purchase, no evidence of delivery was produced, and the onus was on the assessee to prove delivery. Therefore, the transaction was deemed speculative, and the CIT(A) erred in allowing the set off against short-term capital gain. The order of the CIT(A) was set aside, and the appeal of the revenue was allowed.

Conclusion:
The Appellate Tribunal held that the transaction involving the sale of shares without delivery was speculative, and the CIT(A) erred in allowing the set off of speculation loss against business income. The order of the CIT(A) was set aside, and the revenue's appeal was allowed.