2010 (4) TMI 1084 - AT - Income Tax

Summary

Issues Involved:
1. Treatment of profit from purchase and sale of shares as capital gains or speculation profit.
2. Set off and carry forward of speculative loss.

Summary:

Issue 1: Treatment of Profit from Purchase and Sale of Shares

The Revenue appealed against the CIT(A)'s order, which directed to treat the profit of Rs. 54,91,643/- from the purchase and sale of shares as assessable under the head 'Capital Gain' instead of 'speculation business' u/s 73 of the IT Act, 1961. The AO had categorized the profit as speculation profit, arguing that the assessee company did not fall under the exceptions provided in the Explanation to Section 73. The CIT(A) ruled that Section 73 applies only to losses from speculation business and not to profits, referencing decisions from the Hyderabad Bench of ITAT and the Special Bench of Mumbai ITAT. The Tribunal upheld the CIT(A)'s decision, noting that the assessee's transactions did not constitute a speculation business and there was no material evidence to suggest otherwise. Consequently, the profit was to be treated as capital gains.

Issue 2: Set Off and Carry Forward of Speculative Loss

The Revenue contested the CIT(A)'s direction to not set off speculative loss of Rs. 9,22,023/- against the income from the purchase and sale of shares and to allow its carry forward. The AO had rejected the assessee's claim due to the absence of detailed information. The CIT(A) accepted the assessee's explanation that the loss was from speculative transactions settled without delivery. However, the Tribunal found that the matter required reconsideration as no detailed information was provided to the AO or CIT(A). The Tribunal set aside the orders of the authorities below and remanded the issue back to the AO for a fresh decision, directing the assessee to provide sufficient material for examination.

Conclusion:

The appeal of the Revenue was partly allowed. The Tribunal upheld the CIT(A)'s decision on treating the profit from the purchase and sale of shares as capital gains. However, it remanded the issue of set off and carry forward of speculative loss back to the AO for reconsideration.