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TMI Blog2012 (6) TMI 715X X X X Extracts X X X X X X X X Extracts X X X X ..... ollowing question as a substantive question of law :- "Whether on the facts and in the circumstances of the case and in law the Hon'ble I.T.A.T. was justified in holding the trading loss of Rs.84,51,000/- as Ordinary Business Loss as against Speculation Loss as held by the Assessing Officer by relying on the decision of the ITAT Delhi bench in the case of Aman Portfolio Pvt. Ltd. 93 ITD 324 ignoring the decision of the Divisional Bench of ITAT Delhi in the case of Frontline Capital Services Ltd. 96 TTJ 201 and also the decision of the ITAT Delhi Bench in the case of Rohini Capital Services Ltd. 92 ITD 317 while deciding that the Explanation to Sec. 73 of the Income-Tax Act, 1961 cannot be invoked in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; b) the explanation refers to the words "income which is chargeable under the heads" and since in the Appellant's case, the only income which is included in gross total income is dividend income, the gross total income mainly consists of "Income from other sources" and therefore, explanation does not apply to Appellants case." The CIT by an order dated 10.1.2001 partly allowed the appeal. 6. The respondent therefore, filed ITA No.3386/Mum/2001. By the impugned order dated 14.7.2005, the ITAT partly allowed the appeal. The respondent's contention based on section 73 was upheld. Following the judgment of the ITAT Delhi Bench in Aman Portfolio Pvt. Ltd. versus D.C.I.T. 92 ITD 324, it was held that section 73 could not be invoked a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng fiction. The deeming fiction stipulates that where any part of the business of a company consists in the purchase and sale of shares of other companies, such company shall, for the purposes of the section be deemed to be carrying on a speculation business to the extent to which the business consists of the purchase and sales of such shares. The deeming fiction applies only to a company and the provision makes it clear that the deeming fixation (sic) extends only for the purposes of the section. The bracketed portion of the explanation, however carves out an exception. The exception is that the provision of the explanation shall not apply to a company whose gross total income consists mainly of income which is chargeable under the heads " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can be set off against the loss which arises from another source under the same head. Sub Section (1) of Section 73 however sets up a bar to the setting off of a loss which arises in respect of speculation business against the profits and gains of any other business. Consequently, a loss which has arisen on account of speculation business can be set off only against the profits and gains of another speculation business. However, for Sub Section (1) of Section 73 to apply the loss must arise in relation to a speculation business. The explanation provides a deeming definition of when a company is deemed to be carrying on a speculation business. If, the submission of the Revenue is accepted, it would lead to an incongruous situation, where in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome which is chargeable under the heads referred to in the explanation. 9. Consequently, in the present case the gross total income of the assessee was required to be computed inter alia by computing the income under the head of profits and gains of business or profession as well. Both the income from service charges in the amount of Rs.2.25 crores and the loss in share trading of Rs.2.23 crores, would have to be taken into account in computing the income under that head, both being sources under the same head. The assessee had a dividend income of Rs.4.7 lacs (income from other sources). The Tribunal was justified, in coming to the conclusion that the assessee fell within the purview of the exception carved out in the explanation to Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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