2020 (11) TMI 445 - AT - Income Tax

Loss from trading in equity shares - speculation loss - claim of the assessee for setting off the loss from the income earned by the assessee under the head business profession - HELD THAT - Transaction to be speculative in nature because the purchase and sale of shares are on delivery basis, may be the possession is with the stockbroker. Once it is held that the transactions are not speculative in nature, then the gain arising out of such trading transactions shall be subject to be taxed only under the head income from business in the case of the assessee. Since income from business and income from profession falls under the same head, set off of loss from one source of income with another source of income under the same head is allowable as per the provisions of section 70 - in the case of the assessee provisions of section 73 will not be applicable for the reasons discussed herein above. Therefore set aside the orders of the CIT (A) on this issue and further direct the AO to treat the loss incurred by the assessee with respect to trading in equity shares as loss from business and set off the same against the income earned by the assessee from their profession.

Summary

Issues:
- Treatment of loss from trading in equity shares as speculation loss and rejection of claim for setting off the loss against income under 'business & profession'
- Confirmation of levy of interest under sections 234C and 234D of the Act

Analysis:
1. The appeals were filed against the orders of the Ld. CIT (A) regarding the treatment of losses from trading in equity shares and the levy of interest under sections 234C and 234D of the Act for the assessment year 2013-14.

2. The main issue was the treatment of the losses as speculation loss by the Ld. AO, disallowing the set off of the losses against income under 'business & profession'. The Ld. CIT (A) upheld the AO's decision based on the provisions of the Act and previous case law.

3. The assessees argued that the transactions were based on actual delivery of shares through a stockbroker and not speculative in nature. They contended that the losses should be allowed to be set off against their professional income.

4. The Tribunal found that the transactions were indeed on actual delivery basis and not speculative. As per section 43(5) of the Act, transactions without actual delivery are considered speculative. Therefore, the losses were to be treated as business losses and allowed to be set off against professional income under section 70 of the Act.

5. The Tribunal set aside the orders of the Ld. CIT (A) and directed the Ld. AO to treat the losses from trading in equity shares as business losses and permit their set off against the professional income of the assessees.

6. The Tribunal acknowledged the delay in pronouncing the order due to the Covid-19 pandemic but justified the decision based on extraordinary circumstances. The reference to a similar case decision further supported the Tribunal's reasoning.

7. In conclusion, the appeals of the assessees were partly allowed by the Tribunal, emphasizing the non-speculative nature of the transactions and the eligibility for set off against professional income.