1992 (8) TMI 115 - AT - Income Tax

Summary

Issues:
Whether losses on purchase and sale of shares can be adjusted against other income of the assessee.

Analysis:
The judgment pertains to three appeals by the assessee relating to assessment years 1982-83 to 1984-85. The main issue common to all three years is whether the losses shown by the assessee on the purchase and sale of shares could be adjusted against other income. The Revenue authorities contended that the assessee was engaged in speculative business, while the assessee claimed to be an investment company. The argument centered around whether the assessee met the definition of an 'investment company' as per section 109(ii) of the Act. The assessee's counsel argued that the company's income mainly consisted of sources like property income and income from other sources, aligning with the definition of an investment company. The Revenue's stance was that the company primarily dealt in publication and sale of books, and the purchase of speculation losses was a strategy to reduce tax liability.

The Tribunal delved into the definitions of 'investment company' and 'speculation business' as per the relevant sections of the Act. It was observed that the definition of an investment company did not mandate that a company must remain the same over the years or that the objects of the memorandum of association were determinative. The Tribunal emphasized the need to apply the criteria of an investment company annually. Considering the income details provided by the assessee, it was evident that the company's major income sources were property income and income from other sources, indicating alignment with the definition of an investment company.

The Tribunal referred to the Explanation to section 73, which stated that if an investment company engaged in the purchase and sale of shares, it would be considered as trading in shares rather than engaging in speculation business. Therefore, the losses incurred by the investment company on the purchase and sale of shares were to be adjusted against other income. Consequently, the Tribunal allowed the appeals for the assessment years 1982-83 and 1983-84, and partly allowed the appeal for the assessment year 1984-85. The losses for the respective years were directed to be adjusted against other income of the assessee.