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Issues Involved:
1. Depreciation on BSE Membership Card. 2. Allocation of expenditure in respect of speculation loss. 3. Addition on account of cessation of liability. 4. Addition on account of interest not being charged on loans given by the assessee. Summary: Issue 1: Depreciation on BSE Membership Card Ground No. 1 refers to the direction of the CIT(A) in allowing depreciation on BSE Membership Card. Both the parties have fairly conceded that this issue was decided by the Hon'ble Bombay High Court in the case of Techno Shares & Stocks Ltd. 318 ITR 687 wherein the Hon'ble High Court has held that BSE Membership Card is not eligible for depreciation. Respectfully following the same we reverse the order of the CIT(A) and restore the order of the A.O. Ground No. 1 is considered allowed. Issue 2: Allocation of Expenditure in Respect of Speculation LossGround Nos. 2 & 3 pertain to the allocation of interest in respect of speculation loss. The A.O. in his order has observed that the assessee has earned an amount of Rs. 1,31,39,526/- on account of trading in shares and also earned brokerage amount of Rs. 1,49,75,135/-. He was of the opinion that according to Explanation to Section 73 the nature of share trading business of the assessee is deemed to be speculative. As per Explanation to section 28, speculation business should be segregated from other business. He thereafter segregated the transactions and allocated the expenditure and arrived at a speculation loss of Rs. 49,66,658/-. Before the CIT(A) it was contended that the activities of share broking and share trading are one indivisible business carried on by the assessee as they have common set of books of account, common funds and common management. It is also a fact that indivisibility of business is supported by all rules and regulation governing such trades, bye laws of BSE. It is further contended that attribution of proportionate expenses was incorrect as the Explanation to section 28 can be invoked only when transactions are in the nature of speculative transactions. Provisions of Explanation to section 28 cannot be invoked and accordingly treating various transactions as speculative does not arise. After considering assessee's explanation the learned CIT(A) has decided as under: "The provisions of section 73 only say that if the assessee's business consists any purchase and sale of shares, the said business would be speculative business and loss on account of such speculative business would be deemed to be speculation loss and the same is allowed to be set off against the speculation profit. Nowhere in the Act, it is provided that expenditure should be allocated with respect to such transactions. It is true that speculation business as defined u/s. 43 need to be computed as separate business under the explanation 28 treating that speculation business to be distinct and separate from any other business. The speculation business which has been defined u/s. 43 is the business. The speculation business which has been defined u/s. 43 is the business where actual delivery of the goods or shares does not take place whereas in the deeming provisions of explanation to section 73 even there is physical delivery of shares, it is deemed to be speculation loss for the limited purpose of setting it off against the speculation profit. When the share trading activity of the assessee is deemed to be speculation business, there can not be another deeming provision or it cannot be deemed by the Assessing Officer that these transactions would amount to transactions u/s. 43. Act does not provide for that. As stated earlier, what is to be borne in mind is the intention of legislature and what has been said in the statute and also what has not been said. What has not been said in this context is allocation of expenditure. Hence the Assessing Officer cannot import a meaning which has not been permitted by the legislature." Before us the learned DR and counsel reiterated respective submissions. We have considered the issue. As correctly held by the CIT(A), considering speculative nature of transactions will come only when a particular transaction is considered as speculative in nature u/s 43(5). So long as the assessee is dealing in delivery based transactions Explanation to Section 28 does not come into operation as there are no speculative transactions to be considered u/s 43(5). The issue can only be considered with reference to section 73 Explanation. That portion of section will come into play after considering the income under the head "Business" as also income under other heads. As rightly pointed out by the learned counsel for the assessee, the allocation of expenditure and segregation of business will come into picture only when the assessee indulges in speculative nature of transactions. On the facts of the
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