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TMI Blog2016 (1) TMI 991X X X X Extracts X X X X X X X X Extracts X X X X ..... from business or profession because assessee is not running a non-banking financial company (NBFC) nor its main object was of finance and earning of income from giving loans else interest income from such loans and advances should have figured under the head profits and gains of business. Therefore, assessee’s business does not fulfill the condition no.2 of explanation to sec.73 of the Act. Further there has been an amendment made by Finance Act, 2015 w.e.f. 1.4.2015 where at the place of “principal business” fo which is banking has been substituted by “principal business of which the business is of trading in shares or banking”. This amendment itself conveys that business of trading in shares was not included in the explanation to sec.73 of the Act and assessee’s business is mainly of trading in shares as reflected from the main objects of the Memorandum of association and the audited financial statements. We are, therefore, of the view that assessee’s business is not covered under the explanation to section 73 of the Act and we find no reason to interfere with the order of ld. CIT(A) and we uphold the same. - Decided against assessee - ITA No. 1713/Ahd/2015 - - - Dated:- 27 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 143(2) of the Act was issued on 27.08.2010 and served upon the assessee. Assessing Officer while going through the computation of income and financial statement during assessment proceedings noticed that assessee has shown loss on trading of shares of ₹ 14,93,823/- and income from brokerage at ₹ 1,77,164/- and interest on loans and advances at ₹ 9,53,119/-. Assessing Officer framed assessment order by treating the loss on trading of shares as speculation loss which could be set off only against speculation income for the very reason that as per his observation assessee was not falling under the provisions of explanation to section 73 of the Act. 4. Aggrieved, assessee went in appeal before the CIT(A) who has confirmed the addition by observing as under :- 4. I have perused the assessment order and submission of the appellant. I have perused the case laws relied upon by the appellant. After considering facts of the case, and contentions of the appellant and the AO, the only point of determination regarding disallowance of loss of ₹ 14,93,823/- incurred on sale and purchase of shares and treating the same as speculation loss is adjudicated as follows ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are to deal in shares, stocks, bonds, etc., to provide package of investment services and to render profolio management services To grant loans and advances is not included in the main objects of the company. To lend and advance money or give credit is mentioned only at sl.no.15 in objects incidental or ancillary. Further under other objects sl.no.35 mentions the object as to carry on and undertake the business of finance and trading. Thus granting of loans and advancing is at best an ancillary or incidental object and not the main object of the company. Hence, granting loans and advances is not the principal business of the appellant. ii) The sales turnover of shares during the years was approximately ₹ 1.07 crores while the purchase turnover of shares was approximately ₹ 1.27 crores. The total outstanding as on 31.3.09 under loans advances was approximately ₹ 103 crores. The outstanding under this head as on 31.03.2008 was approximately ₹ 1.14 crores. This shows that no new loans were advanced during the year consideration Infact, the loans have been received back. In absolute terms, the loans turnover at ₹ 1.03 crores is much less than ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al capital employed and, therefore, as the assessee s principal business is money lending the case of the assessee will fall in the explanation to section 73 of the Act and loss from trading of shares should not be treated as speculation loss. 7. On the other hand, ld. DR supported the orders of lower authorities. 8. We have heard the rival contentions and perused the material on record. To examine the aspect that whether assessee is covered in the explanation to section 73 of the Act let us go through the provisions of section 73 of the Act for dealing the issue. Sec. 73. (1) Any loss, computed in respect of a speculation business carried on by the assessee, shall not be set off except against profits and gains, if any, of another speculation business. (2) Where for any assessment year any loss computed in respect of a speculation business has not been wholly set off under sub-section (1), so much of the loss as is not so set off or the whole loss where the assessee had no income from any other speculation business, shall, subject to the other provisions of this Chapter, be carried forward to the following assessment year, and- (i) it shall be set off against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profits and gains from business as a figure of loss is of ₹ 18,34,088/-. Therefore, assessee company does not fulfill the condition no.1 as mentioned above. (b) The second condition refers to the principal business run by assessee. On examination of Memorandum of association the main object of the company to be persued on its incorporation (A) The main objects of the company to be pursued on its incorporation are 1. To deal as principal and/or agents in shares, stocks, bonds, securities, units, debentures, fixed deposits and financial instruments and to carry on the business as share and stock brokers. 2. To provide a package of investment/merchant banking services by acting as managers, brokers and/or advisors to public/right issue or private placement or sales of securities and to act as issue house/registrar underwriters and sub-underwriters and transfer agents and to render services for mobilization of resources by way of shares, debentures, bonds, deposit schemes and loan syndication. 3. To render portfolio management service by investment in shares, debentures, stocks, debenture-stocks, bonds, company deposits, government securities, governmen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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