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TMI Blog2010 (3) TMI 1223X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of ₹ 49,66,658 on account of allocation of expenditure in respect of speculation loss. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the expenses allocated in respect of speculation loss ignoring the ratio laid down in the case of Eastern Aviation Industries Ltd., 208 ITR 1023 (Cal) 4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of ₹ 23,07,285 on account of cessation of liability ignoring the fact that the assessee could not produce any confirmation from the creditors. 5. On the facts and in the circu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has earned an amount of ₹ 1,31,39,526/- on account of trading in shares and also earned brokerage amount of ₹ 1,49,75,135/-. He was of the opinion that according to Explanation to Section 73 the nature of share trading business of the assessee is deemed to be speculative. As per Explanation to section 28, speculation business should be segregated from other business. He thereafter segregated the transactions and allocated the expenditure and arrived at a speculation loss of ₹ 49,66,658/-. 6. Before the CIT(A) it was contended that the activities of share broking and share trading are one indivisible business carried on by the assessee as they have common set of books of account, common funds and common management. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inted out by the assessee, Supreme court has held in the case of State or Tamilnadu V. M.K. Kandaswami that in interpreting their [provisions a construction which would defeat its purpose should be avoided and courts should also refrain from adopting a construction which would upset or even impair the purpose in introducing a particular provisions in the stature. Thus, it is very clear that construction need to be done with a purpose and should not traverse beyond the meaning of the statute. The provisions of section 73 only say that if the assessee s business consists any purchase and sale of shares, the said business would be speculative business and loss on account of such speculative business would be deemed to be speculation loss and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pvt. Ltd. (155 ITR 711) that Legal fiction has to be carried to its logical conclusion but only within the field of definite purpose for which fiction is created. It is well settled that legal fictions are created only for some definite purpose and these must be limited to that purpose and should not be extended beyond that legitimate field . Thus fiction which has been created for the purpose of section 73 has very limited purpose i.e., treating the share trading of assessee as speculative business, beyond this, there can not be any other interpretation nor anybody is allowed to create fiction within fiction and say that allocation of expenditure need to be done in this regard in respect of the said speculation business. Hence allocat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as income under section 41(1). It was contended before the CIT(A) that the provisions of section 41(1) does not apply and these balances are shown as liability in the Balance Sheet as on 31.03.1999 and has neither remitted nor ceased to be liability. However, the A.O. has not shown that there has been any remission or cessation of liability. After considering assessee s submission the CIT(A) has deleted the addition stating as under: - 11. I have considered the submissions of the assessee and also the order of the A.O. It is true, that the assessee has been asked to produce the confirmations within a short period of time. Though the assessee was able to procure large number of confirmations, the confirmations in respect of these two pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on in respect of the outstanding credits it does not mean that the amounts have been ceased to be in the books of account and treated as income under section 41(1). On the facts of the case the order of the CIT(A) is confirmed and the ground is rejected. 10. Ground Nos. 5 6 pertains to disallowance of interest on the plea that assessee has advanced interest free loans to three parties and since the assessee failed to establish the nexus and the loans have been advanced out of borrowed funds. It was the contention that assessee had sufficient funds to cover the entire advance on non-interest bearing funds which were available with the assessee. Considering the facts and legal principles the CIT(A) deleted the addition stating as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X
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