2009 (7) TMI 1245 - AT - Income Tax

Summary

Issues Involved:
1. Treatment of Dividend Income
2. Treatment of Brokerage Income
3. Computation of Speculation Loss
4. Carry Forward of Losses
5. Interest Charged u/s 234B

Summary:

1. Treatment of Dividend Income:
The CIT(A) held that "dividend income was received in respect of shares which were held as stock in trade. Therefore it is part of the business income, having been earned in the course of the share trading." The Tribunal agreed with this view, stating that "for the purpose of applying the Explanation to sec.73, the dividend income arising from shares held as stock-in-trade has to be considered as part of the share business income and dealt with accordingly."

2. Treatment of Brokerage Income:
The CIT(A) considered brokerage income as part of the share business. However, the Tribunal reversed this decision, citing the Delhi Bench of the Tribunal in M.G. Capital Services Ltd v ACIT (2004) 91 TTJ 214, which held that "the brokerage income earned by an assessee as a share broker cannot be set off against the speculation loss because there was no element of speculation whatever in the brokerage income received by the assessee."

3. Computation of Speculation Loss:
The Assessing Officer computed the speculation loss at Rs. 15,51,84,920 by adding the expenditure of Rs. 6,40,44,409 to the share trading loss of Rs. 9,11,40,511. The CIT(A) directed that "the Assessing Officer should have computed the profit/loss from the entire business in shares without excluding the various items of income from the same and deemed the resultant figure as speculation loss."

4. Carry Forward of Losses:
The assessee's CO contended that the Assessing Officer erred in not allowing the carried forward losses of earlier years. The Tribunal restored this ground to the Assessing Officer for a fresh decision "in accordance with law after due opportunity to the assessee."

5. Interest Charged u/s 234B:
The second ground of the CO against the interest charged u/s 234B was deemed consequential. The Tribunal directed the Assessing Officer "to give consequential relief, if any."

Conclusion:
The Tribunal confirmed the CIT(A)'s decision regarding dividend and kasar income but reversed the decision on brokerage income. The appeal and CO were partly allowed.