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TMI Blog2012 (12) TMI 565X X X X Extracts X X X X X X X X Extracts X X X X ..... here an assessee is a company whose business consists in any part of the purchase and sale of shares of other Companies, it shall be deemed to be carrying on a speculation business to the extent to which the business consists of purchase and sale of such shares. Whether or not it is a profit or loss that has resulted from carrying on such business, is a consideration which is alien to the meaning of what constitutes a speculation business by the explanation to Section 73, any loss computed in respect of that speculation business, can be set off only against the profits and gains of an other speculation business. Therefore, loss from derivatives transactions is to be allowed to be set off against the profit arising out of delivery based tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hase and sale of shares/units both delivery and non-delivery based and derivatives. In response, assessee furnished all the necessary details of purchase and sale of non delivery shares and derivatives for the entire year, scrip-wise and also furnished breakup of loss sustained. AO further observed that assessee had a net profit of Rs..16,35,277/- from trading in non delivery shares and loss of Rs..2,20,58,511/- from trading in derivatives i.e. future options. He required assessee to explain, as to why the loss of Rs..1,60,06,306/- incurred from derivative transactions from the period 1.4.2005 to 24.01.2006 should not be disallowed as per the provisions of section 73. In response assessee submitted that it had purchased shares worth Rs..87, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y which has grossed total income mainly under the head interest on securities, income from house property and income from other sources . In order to demonstrate this facts, assessee drew attention to its income shown under the head business and capital gains as under: Business Income - Rs..5,91,44,089/- = 90.28% Capital Gains - Rs.. 63,66,232/- = 9.72% Total - Rs..6,55,07,321/- = 100% From this it was pointed out that the predominant income of assessee was from business and not from capital gains. Therefore, assessee does not come within the purview of the investment company. Hence Explanation to section 73 was squarely applicable to the assessee s case. iii) Assessee was engaged in the purchase and sale of shares of other c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peculative business. In the present case the F O transactions loss of Rs.1,60,06,306/- has been held to be speculation loss and the delivery based transactions are giving rise to deemed speculative profit in view of Explanation to 73(1). Hence the loss from non-delivery based transactions is required to be set off against delivery based transactions; as both are speculative transactions. 7.5 The above findings are also supported by a recent Bombay High Court judgment in the case of CIT vs. Lokmat Newspapers (P) Ltd (2010) 186 Taxman 370(Bom.) in which it was held as follows: The submission of the Revenue, could not be accepted, having regard to the plain meaning of the explanation to Section 73. The submission of the Revenue was that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsideration which is alien to the meaning of what constitutes a speculation business by the explanation to Section 73, any loss computed in respect of that speculation business, can be set off only against the profits and gains of an other speculation business. Similarly, for the purposes of sub-section (2), the loss in respect of a speculation business which has not been set off either in whole or in part, can be carried forward and can be set off against profits and gains "of any speculation business". The expression "any speculation business" means a speculation business of the assessee in respect of which profits and gains for the Assessment Year in question have arisen and there is no justification to restrict the content of that specu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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