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Issues:
Interpretation of section 73 and its Explanation regarding treatment of loss in purchase and sale of shares as speculation loss. Determination of whether the assessee qualifies as an investment company or banking company to be exempt from the said Explanation. Analysis: The case involved two appeals related to the assessment years 1981-82 and 1982-83 concerning a private limited company engaged in various businesses, including dealing in paper-board, packing, commission on hiring chlorine cylinder, and shares trading. The initial claim for speculation loss was disputed by the Income Tax Officer (ITO), who adjusted the loss against dividend income, resulting in a gross total income at a loss for both years and negating the claim for deduction under section 80M of the Income-tax Act, 1961. The assessee appealed to the Commissioner (Appeals) contending that the loss on shares should be treated as speculation loss under section 73, which would allow for relief under section 80M. The Commissioner, however, held that the assessee was an investment company, thus upholding the ITO's decision. Upon further appeal, the Tribunal analyzed the provisions of section 73 and its Explanation, emphasizing that any company dealing in shares incurring a loss is deemed to be carrying on a speculation business. The Tribunal clarified that the burden is on the assessee to claim exemption from the Explanation by proving it is an investment or banking company. In this case, as the assessee did not make such a claim, the loss on shares had to be treated as speculation loss, requiring it to be carried forward and not set off against dividend income. The Tribunal concluded that the assessee did not qualify as an investment or banking company, and thus the loss on shares should be treated as speculation loss, entitling the assessee to relief under section 80M. The Tribunal directed the ITO to allow the said relief in accordance with the law, ultimately allowing the appeals in favor of the assessee.
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