1996 (3) TMI 159 - AT - Income Tax

Summary

Issues Involved: Interpretation of Explanation to section 73 of the Income-tax Act regarding set off of speculation loss against trading profit.

Summary:
1. The appeal challenged an order u/s 263 for the assessment year 1989-90, where the Commissioner objected to setting off speculation loss against trading profit.

2. The Commissioner contended that only losses, not income, in certain companies' share dealings are deemed as speculation losses. The Commissioner set aside the assessment for reframing based on this legal position.

3. The assessee argued that the Explanation to section 73 is a deeming provision applying to companies trading in shares, expanding the scope of speculation. Even with deliveries, transactions are deemed speculative.

4. The assessee further argued that the Commissioner's distinction between profit and loss for set off under Explanation to section 73 is unfounded. They cited legal precedents supporting the interpretation of deeming provisions.

5. The Tribunal found merit in the assessee's contentions, emphasizing that the Explanation is a deeming provision covering both profit and loss in specified businesses. The language of section 73 does not support the Commissioner's distinction for set off, hence cancelling the order u/s 263.

6. The appeal was allowed in favor of the assessee.