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TMI Blog2013 (8) TMI 552X X X X Extracts X X X X X X X X Extracts X X X X ..... ness, other than in speculation business, can be set off against profits of speculation business as also non speculation business - Decided in favour of assessee. - IT Appeal No. 114 (Lkw.) of 2011 - - - Dated:- 6-6-2013 - Sunil K Yadav And Pramod Kumar , JJ. For the Appellant : R.B. Shukla and A.R. Shukla. For the Respondent : S.L. Meena. ORDER:- PER : Pramod Kumar By way of this appeal, the assessee appellant has challenged correctness of learned CIT (A)'s order dated 7th January 2011, in the matter of assessment u/s 143 (3) of the Income Tax Act 1961for the assessment year 2005-06. 2. The short issue that we are required to adjudicate in this appeal is whether or not the CIT (A) was justified in declining set off of business losses, of the current year as also of the earlier years as brought forward, against profit in speculation business during the current year. This issue is raised by way of following grounds of appeal set out in the memorandum of appeal:- "1. BECAUSE the Ld. CIT(A) has erred in law and on facts in enhancing the computation of assessed income of the appellant at Rs.3,84,09,932/- on the ground that, set off of current year non- s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y to the facts, law and principles of natural justice. 3. To adjudicate in this appeal, only a few material facts need to be taken note of during the course of assessment proceedings, the Assessing Officer treated the gains on sale of shares, as speculative profits as there was no evidence of delivery of shares. While the Assessing Officer adjusted the business loss incurred during the year, which was computed at Rs.1,66,63,443, the Assessing Officer brought the balance income of Rs.2,17,46,490 to tax as speculation income in the hands of the assessee. He did not allow set off of business losses carried forward against this assessed income of Rs.1,66,63,443. Aggrieved assessee carried the matter in appeal before the CIT (A) but without any success. Not only that the CIT (A) confirmed declining the set off of business losses being carried forward against speculation profits, he also held that the speculation profit cannot be set off against business losses of the current year as well. He thus enhanced the assessed income to Rs.3,84,09,93, and, while doing so, he observed as follows: "14. I find that the loss carried forward relating to assessment years 1998-99 and 2002-03 as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -99 and 2002-03 against the income from speculative business of the current year. There is no other provision in Chapter-VI against our claim. The Assessing Officer has overlooked to this set off." The reply of the appellant does not explain the position referred above -that the speculation income has been treated separate from business income as per Explanation-2 of section 28. Due to this reason and also as per the definition provided separately u/s 43 of the I.T. Act, it cannot be treated as part of business income. The different provisions relating to set off and carry forward of speculation income/loss u/s 73 of the I.T Act do not specifically provide and/or support the claim of the appellant. 16. In view of the discussion above, the income of the appellant during the year is liable to be assessed at Rs.3,84,09,932/- and business loss of Rs.1,66,63,443/- is liable to be carried forward as per law after verification by the AO. Thus, appeal results in enhancement of assessed income from assessed income of Rs.2,17,46,489/- to Rs.3,84,09,932/-." 4. The assessee is not satisfied and is in appeal before us. 5. We have heard the rival contentions, perused the material on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t cannot be so set off, it shall be carried forward to the following assessment year. The expression "any" business clearly includes all businesses, without making any distinction between speculation and non-speculation business, and, therefore, going by the plain language of the statutory provision losses in a business, other than in speculation business, can be set off against profits of speculation business as also non speculation business. 7. Learned CIT(A) was right in appreciating that speculation business and non-speculation business are treated as distinct business, but what he clearly missed out was that the purpose and impact of this distinction restricts only set off of losses in speculation business against the profits of non-speculation business. 8. To understand the scope of these restrictions, it will be appropriate to take a look at the purpose and in the backdrop in which the restrictions on set off of speculation losses was brought in the statute. Until assessment year 1953-54, income tax law did not recognize any such distinction between losses in speculation and non-speculation business. It was only with effect from 1st April 1953 that the distinction betwee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been that all losses incurred by an assessee under any of the heads mentioned in section 6 would be adjusted against profits under all other heads, and then the total income of the assessee would be worked out on that basis. The first proviso to this sub-section, however, lays down an exception to this general rule contained in the principal clause. The exception relates to income from business consisting of speculative transactions, and places the limitation that losses sustained in speculative transactions are not to be taken into account in computing the profits and gains chargeable under the head "Profits and gains of business, profession or vocation", except to the extent that they will be set off against profits and gains in any other business which itself consists of speculative transactions. The effect of the proviso is that if there are profits in speculative business, those profits are added to income under the other heads mentioned in section 6 for purposes of computing the total income of the assessee in order to determine the tax under section 23 of the Act. On the other hand, losses in speculative business are not to be taken into account when computing the tota ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssus, which broadly refers to the principle that a matter which has not been provided in the statute but should have been there, cannot be supplied by us, as, to do so will be clearly beyond the call and scope of our duty which is only to interpret the law as it exists." As Rowlatt, J. has said, in Cape Brady Syndicate v. IRC 1 KB 64, "In a taxing statute, one has to look merely at what is clearly said; there is no room for any intendment." The temptation of resorting to a rather creative process of an aggressive interpretation of statutes, which gives an excuse to read between the lines, therefore, must be resisted. Even as we say so, we are also of the view that, in any event, there is nothing between the lines to justify such an interpretation either. Therefore, even as speculation business was to be treated as distinct business, the impact of this treatment is confined to the losses of speculation business not being set off against the incomes in the same head or incomes under the other heads. The authorities below went well beyond the statutory provisions in declining the set off of normal business losses against the speculation profits. This approach is unsustainable in law. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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