2021 (4) TMI 847 - AT - Income Tax

Denial of the loss by treating as speculation loss - CIT(A) upheld the action of AO referring the decision of Hon ble Kolkata High Court in CIT vs. Arvind Investments Ltd. 1990 (3) TMI 5 - CALCUTTA HIGH COURT - HELD THAT - Asgross total income of assessee was required to be computed inter-alia by computing the income under head profit and gain of business and profession as a whole both the income from service charges in the amount of 2.25 crore and loss in share trading of 2.23 crore would have to be taken into account in computing the income under that head both the being sources under the same head. Further the assessee has a dividend income of 4.7 lakhs under the head income from other sources thus assessee falls within the purview of exception carved out in explanation to Section 73 of the Act and assessee would not be deemed to be carrying on speculation business for the purpose of Section 73(1) The facts in case law of Arvind Investments Ltd 1990 (3) TMI 5 - CALCUTTA HIGH COURT relied by Ld. CIT(A) are at variance. In the said case Tribunal held that the sole business of the company was in share dealings. As accepting the assessee s contention it held that where a part of the business of a company consisted of the purchase and sale of shares then only the Explanation to section 73 would come into play and not otherwise when the sole business of the company was in share dealings. However the facts in the present case is entirely differ that is income shown by assessee is mainly consist of income from other sources. We found that the income shown by assessee is mainly consist of income from other sources of 94, 28, 211/-. Thus in our view the assessee fall within the purview of Section 73 of the Act accordingly ground no.1 to 3 of assessee are allowed.

Issues Involved:
1. Addition of ?13,86,843 by the Assessing Officer (AO) and confirmed by CIT(A).
2. Treatment of share trading loss of ?13,76,206 as speculation loss under Explanation to Section 73 of the Income Tax Act.
3. Adjustment of share trading loss against normal business income.
4. Addition of ?10,637 on account of Vatav Kasar expenses.

Detailed Analysis:

1. Addition of ?13,86,843 by the Assessing Officer (AO) and confirmed by CIT(A):
The assessee contested the addition made by the AO and confirmed by the CIT(A) to the extent of ?13,86,843, arguing that it was contradictory to law and facts of the case. However, the Tribunal did not provide a separate detailed analysis for this specific amount, focusing instead on the broader issues of speculation loss and Vatav Kasar expenses.

2. Treatment of share trading loss of ?13,76,206 as speculation loss under Explanation to Section 73 of the Income Tax Act:
The AO treated the share trading loss of ?13,76,206 as speculation loss, which cannot be set off against normal business income. The assessee argued that the gross total income consisted mainly of income chargeable under the heads "Income from other sources" and "Capital gains," thus falling within the exception of Explanation to Section 73. The Tribunal referred to the decision of the Hon'ble Bombay High Court in CIT Vs. Darshan Securities Pvt. Ltd., which held that the gross total income should be computed by considering all income, including business income and losses, to determine if the exception applies. The Tribunal concluded that the assessee's gross total income mainly consisted of income from other sources, thus falling within the exception of Explanation to Section 73.

3. Adjustment of share trading loss against normal business income:
The AO disallowed the set-off of the share trading loss against normal business income, treating it as speculation loss. The CIT(A) upheld this view, relying on decisions from the Hon'ble Kolkata High Court. However, the Tribunal, citing the Bombay High Court's decision in Darshan Securities Pvt. Ltd., found that the assessee's income from other sources and capital gains exceeded the business income, thus qualifying for the exception under Explanation to Section 73. Therefore, the Tribunal allowed the set-off of the share trading loss against normal business income.

4. Addition of ?10,637 on account of Vatav Kasar expenses:
The AO disallowed the expenditure of ?10,637 claimed under Vatav Kasar, viewing it as a claim that can only be made by dealers. The assessee did not press this ground due to the smallness of the amount, and the Tribunal dismissed this ground as not pressed.

Conclusion:
The Tribunal allowed the appeal in part, specifically allowing the set-off of the share trading loss against normal business income by applying the exception under Explanation to Section 73. The addition of ?10,637 on account of Vatav Kasar expenses was dismissed as not pressed. The order was pronounced on 17.03.2021 by placing the result on the notice board.

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