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2022 (3) TMI 1208 - AT - Income TaxDisallowance of set off of losses by treating as speculative loss - assessee has claimed set-off of losses incurred from trading in shares and securities with the capital gain income from other sources ad share activities undertaken by assessee is speculative in nature and losses sustained thereto cannot be set-off against the capital gain income or other sources - whether assessee wrongly set-off his income with the business losses of speculative nature and are hit by the Explanation of section 73 of Income Tax Act? - HELD THAT - On perusal of profit and loss account, we find that the main business of the assessee during the year is of trading in shares and securities. In the balance sheet as on 31.03.2015, the assessee has shown stock in trade however, the closing stock of property and at Shilaj Plot No. 1507A and Block No. 73 Jaspur Ahmedabad respectively. Similarly on 31.03.2014, the assessee has shown stack in trade, and the closing stock of property at Shilaj Plot No. 1507A and Block No. 73 Jaspur Ahmedabad respectively. We have also noted that the Ld. CIT(A) in his finding has accepted that during the assessee has shown only profit and loss account where turnover consist of sale of shares - we are of the view that the assessee is entitled for set off of losses as the principal business of assessee is in trading of shares. In the result, the ground of appeal raised by the assessee is allowed.
Issues:
Appeal against disallowance of set-off of losses arising from trading in shares under section 73 of the Income Tax Act for Assessment Years 2015-16 and 2016-17. Detailed Analysis: 1. Issue of Disallowance of Set-Off of Losses: - The Assessee challenged the disallowance of set-off of losses under section 73 for both A.Y. 2015-16 and 2016-17. - The Assessing Officer disallowed the set-off, considering the main object of the Company from the Memorandum of Association (MoA) which was construction-related, not trading in shares. - The Assessee argued that the principle business was indeed trading in shares, not construction, as evidenced by the Profit and Loss Account and balance sheet. - The Assessee contended that the Explanation to section 73 excludes losses from being speculative if the principle business is trading in shares, which should apply in this case. - The ld.CIT(A) upheld the disallowance, stating that despite no turnover from trading in shares, the Assessee primarily engaged in construction activities as per MoA. 2. Arguments Before the Tribunal: - The Assessee's representative emphasized that the primary business was trading in shares, supported by the Profit and Loss Account and operational activities. - The representative highlighted that the MoA permitted trading in shares and securities, and the actual business activity should determine tax treatment. - The Revenue's representative contended that the Assessee's business was primarily in real estate, not trading in shares, as per the balance sheet and MoA. - The Revenue relied on the ld.CIT(A)'s order, emphasizing the non-allowability of speculative losses against other income. 3. Tribunal's Decision: - The Tribunal found that the Assessee's main business during the years in question was trading in shares, evident from the Profit and Loss Account and balance sheet. - Noting the substantial stock-in-trade related to shares compared to real estate, the Tribunal concluded that the Assessee was entitled to set-off losses against other income. - The Tribunal allowed the appeal, emphasizing the Assessee's principal business activity of trading in shares for both A.Y. 2015-16 and 2016-17. - Based on the consistency principle, the Tribunal allowed the appeal for A.Y. 2016-17 as well, following the decision for the earlier year. Therefore, the Tribunal allowed the Assessee's appeals, overturning the disallowance of set-off of losses arising from trading in shares under section 73 of the Income Tax Act for both A.Y. 2015-16 and 2016-17.
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