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TMI Blog2010 (9) TMI 846X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal. First one which we consider as a substantial question of law is whether the Tribunal was justified in allowing business loss claimed by the assessee on purchase and sale of units of the Unit Trust of India. The other question pertains to department's claim for assessment of interest allegedly accrued to the assessee in respect of a loan advanced to another company. However, we find from the orders of the Tribunal that the other company to which the assessee advanced the loan had become a sick industry unable to pay interest to the assessee. So much so, the Tribunal found that the first appellate authority rightly disallowed the department's claim. Further, it is seen from the first appellate authority's order confirmed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t assessee does not suffer a loss because the loss on purchase and sale of units is made up by earning income by way of dividend received from the Unit Trust of India on 30th June of the year which is not taxable. The exact nature of the business transaction entered into by the assessee is stated in all the orders including that of the Tribunal which is as follows. During the previous year the assessee entered into a contract with a share broker in Madras who agreed to purchase 15,00,000 units of Unit Trust of India for the assessee at the rate of Rs. 14.90 per unit and agreed to sell the same shortly thereafter for the assessee at the rate of Rs. 13.20. Under this deal the assessee booked a business loss of Rs. 26,62,500. The interesting f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not entitled to set off the loss arising out of the same against business profits by virtue of section 73(1) of the Act. However, CIT (Appeals) by relying on Explanation to section 73 of the Act held that units of U.T.I. are not shares of a company and so much so, purchase and sale of units does not amount to "speculation business" and, hence assessee is entitled to set off of loss arising out of the transaction against business income. The CIT (Appeals) relied on decision of the Income-tax Appellate Tribunal in the case of Apollo Tyres Ltd. which got confirmed by this Court in CIT v. Apollo Tyres Ltd. [1999] 237 ITR 706, which again is confirmed by decision of the Supreme Court in Apollo Tyres Ltd. v. CIT [2002] 255 ITR 273. On second a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther companies, such activity shall be deemed to be speculation business. This Court in Apollo Tyres Ltd.'s case (supra) rightly held that units of U.T.I. cannot be treated as shares of a company and so much so, Explanation to section 73 is not attracted and the Hon'ble Supreme Court confirmed the said finding of this Court. We do not think there can be any controversy on this issue because units issued by U.T.I. are neither shares nor even equal to the shares of a company. However, the question is whether purchase and sale of units, though not coming within the description of shares of a company, can constitute speculation business particularly, the way in which the assessee has done it. 5. We notice that speculation business visua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idend and both the transactions are with one company which gave loan for the purchase of the units and also repurchased the same units as stated above. The speculation involved is obvious i.e., the possibility of getting more in tax saving combined with the dividend likely to be received over the loss suffered and expenditure incurred by way of interest and charges paid to the broker. Therefore, in our view, the transaction of purchase and sale of units when done as a business in a speculative manner, the loss therefrom could be set off only against profit arising in speculation business in terms of section 73(1) of the Act. Assessee in fact claimed set off of loss from speculation business against income from tea plantation which in our vi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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