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TMI Blog2019 (5) TMI 39X X X X Extracts X X X X X X X X Extracts X X X X ..... vances or dealing in shares and whether case of the assessee falls within the exception under Section 73 and whether loss from shares dealing was speculation loss or not in the facts and circumstances of this case. Accordingly we set aside the impugned order of the Tribunal and remand to it on the aforesaid issues with direction to decide the aforesaid issue afresh after hearing the parties and examining the relevant records including the records of the assessment proceeding but it would not allow the assessee to file any fresh or new document and on consideration of the same if the Tribunal comes to the conclusion that the principle business of the assessee is of granting of loans and advances and not dealing in shares in that event Tribunal would allow the set off of the loss in shares dealing as business loss as permitted under Section 71 72. Tribunal shall dispose the appeal within 6 months from the date of communication of the this order. - ITA 840 of 2008 - - - Dated:- 24-4-2019 - Mr I. P. Mukerji And Mr Md. Nizamuddin, JJ. For The Appellant : Mr. R. K. Murarka, Sr. Adv. And Mrs. Sutapa Roy Choudhury For The Respondent : Mr. P. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above factors have to be judiciously analysed and assessed to determine the principal business of a Corporate assessee. There may be other factors also. Therefore, what is the principal business of the assessee is a very tricky question of fact which needs to be determined by the tribunal threadbare. With these observations, I entirely agree with the conclusions and the reasons by which those conclusions have been reached by my learned brother. I also agree with the final order that his lordship has passed. ( I. P. MUKERJI, J.) MD. NIZAMUDDIN, J.:- Heard counsel for the parties. This appeal of the assessee arises out of the impugned order dated 12th September, 2018 passed by the learned Income Tax Appellate Tribunal relating to assessment year 2004-05. Though substantial questions of law have not been framed in a proper manner by the appellant but on considering the submission of the parties and on perusal of records the main issues emerge and requires adjudication in this appeal are as to whether principal business of the assessee was that of granting loans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g and case of the assessee clearly falls within the exception to the Explanation under Section 73 of the Indian Tax Act, 1961. The assessee further contends that the aforesaid facts could be clearly established by the Auditors report and balance sheet and other documents which have not been discussed and considered by the learned Tribunal in its order. Counsel for the revenue supports the assessment order and order of the Tribunal by contending that granting of loans and advances is not the principal business of the assessee and it is ancillary business activity and denies that the deployment of funds in granting of loans and advances is higher than the funds deployed in shares dealing. The assessee/Appellant in support of its contention and on the ambit and scope of Section 73 and Explanation below it thereto under Income Tax Act, 1961, has relied on the following decisions: i) Unreported decision of this court dated 15the January, 2014 in the case of Commissioner of Income Tax west Bengal-II Calcutta Vs. Middleton Investment Trading Co. Ltd. (ITA No. 196 of 1999) ii) Unreported decision of this co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness. ( 4) No loss shall be carried forward under this section for more than four assessment years immediately succeeding the assessment year for which the loss was first computed. Explanation.- Where any part of the business of a company other than a company whose gross total income consists mainly of income which is chargeable under the heads Interest on securities , Income from house property , Capital gains and Income from other sources , or a company the principal business of which is the business of banking or the granting of loans and advances consists in the purchase and sale of shares of other companies, such company shall, for the purposes of this section, be deemed to be carrying on a speculation business to the extent to which the business consists of the purchase and sale of such shares . The Statement of Objects and Reasons for the added Explanation to section 73 and the Notes on Clauses appended to the Bill explaining the proposed amendment are also quoted below 9[1973] 89 ITR (St.) 107) STATEMENT OF OBJECTS AND REASONS The object of this Bill is to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid companies, the losses from share dealings will now be set off any against profits or gains of a speculation business. Where any such loss for an assessment year is not wholly set off against profits from a speculation business, the excess will be carried forward to the following assessment year and set off against profits, if any, from any speculation business. 19.2 The object of this provision is to curb the device sometimes resorted to by business houses controlling groups of companies to manipulate and reduce the taxable income of companies under their control. 19.3 This provision will come into force with effect from April 1, 1977, and will apply in relation to the assessment year 1977-78, and subsequent years. Ambit and scope of Section 73 of the Income Tax Act, 1961 and Explanation under it can be summarized as follows: ( i) Section 73 of the Act deals with carry forward and set off of losses from speculation business and Explanation to Section 73 of the Act is a deeming provision wherein if specified conditions are satisfied, purchase and sale of shares are deemed speculation activities. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Paharpur Cooling Towers Ltd. (supra) in that case there was specific finding by all the authorities below and this court upheld the said finding and it would appear that the facts of the said case as recorded below by this Court is different from the present case: We are of the view that this case on factual aspect as recorded by the learned Tribunal and other authorities admittedly the sale of shares has been effected by physical delivery of shares. Therefore, the assessee-company cannot get the benefit of set off or carry forward of speculation loss as rightly held by all the authorities. The Revenue has relied on the decision of this court in the case of R.P.G. Industries Ltd. (supra) which is on interpretation of Section 73 of the Act, and Explanation below it where the court has interpreted the same in the following manner but that is not the issue in this case: 26. In the case before us, we have already pointed out that by virtue of the legal fiction created by the added Explanation to section 73 of the Act, even the transactions which are not speculative transactions within the meaning of section 43(5) of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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