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TMI Blog2019 (7) TMI 1037X X X X Extracts X X X X X X X X Extracts X X X X ..... me would be chargeable; for reason of it being negative there could be no tax leviable since that would also be a negative figure. It could only be understood as, when there is a loss, then there would be no payability of tax at all. In such circumstances, we are of the opinion that there could be no set off of the speculative business loss as against the income from other sources for the year, since the exception under the Explanation to Section 73 does not apply to the Company. Assessee also has a contention that sub-section (2) refers to the specific assessment year in which it has to be applied. We cannot accept the said contention also, since the prohibition is insofar as sub-section (1) of Section 73, which provides that any loss in a speculation business shall not be set off except against profits and gains, if any, of another speculation business. This does not provide for looking at the profits and gains arising in each year in which the assessee is carrying on the business. Sub-section (2) of Section 73 is a provision for carry forward as found in Sections 70 to 72 itself. In fact, Section 73 culls out a particular type of business loss out of Section 72 and places it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wed the appeal and directed the A.O. not to treat the loss as speculation loss. The reasoning was that, as per CBDT circular No.204 dated 24.09.1976, non-banking finance companies have been taken out of the scope of application of Section 73 and hence trading loss of such companies shall not be treated as speculation loss. The Revenue preferred an appeal before the I.T.A.T. and vide the impugned order dated 08.08.2004 the appeal was dismissed, holding that Explanation to Section 73 is not applicable to the case of the assessee. It was so held, on the finding that the gross total income of the Company consists mainly of interest on securities , income from house property , income from capital gains and income from other sources . 5. The following substantial questions of law arise for consideration of this Court in appeal: 1. Whether, on the facts and in the circumstances of the case and also in the light of the decisions in 253 ITR 403, 261 ITR 473, 208 ITR 1023, ought not the Tribunal have restored the order of the assessing officer ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal is righ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a group of companies to manipulate and reduce the taxable income of the companies under their control, by involving in speculative investments; as clarified by the CBDT in Circular No.204 dated 24.07.1976. 9. The assessee for the subject year, being 2003-04, had a loss of ₹ 1,68,674/- from the sale of shares. It also had a dividend income of ₹ 31,93,299/-. In addition to this, the assessee had an expenditure from the earlier year; which, as per earlier orders of assessment, was spread over for the subsequent years. The expenditure as applicable to the present year, as is seen from the assessment order produced as Annexure R-1(a); having been set off against the income from business for the year, there was a total loss of ₹ 3,19,13,970/-. The assessee also had income from other sources at ₹ 7,98,850/-, which was completely by way of refund of income tax for the earlier years. The assessee's claim is that the business loss which arose in this particular year could be set off against the income from other sources. 10. The Revenue, however, contends that the assessee being a company engaged in speculative business, the busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eing negative income, the same has to be taken for the purposes of the Explanation to Section 73. The said finding was on the well established proposition that the words income , profits and gains represent a positive income, whereas the loss represents a negative income. All the three decisions cited by the Revenue took support from the decisions of the Hon'ble Supreme Court in CIT v . Harprasad and Co. P. Ltd . [ ( 1975) 99 ITR 118 (SC) ] and CIT v . J.H.Gotla [ ( 1985) 156 ITR 232 (SC) ]. 14. The learned Counsel for the assessee, however, contends that there is an alternate argument, which has not been considered by the Calcutta High Court in any of the decisions. The Explanation specifically deals with a company whose gross total income consists mainly of income which is chargeable under other heads, ie: heads other than income from profits and gains of business or profession . Hence, what assumes significance is the chargeability to income. There is no charge created on the loss and there could only be charge on the income from other sources in the subject assessment year insofar as the assessee is concerned. Hence, for the assessment year the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of exemption as argued by the learned Counsel for the assessee even if found to be acceptable, it has to be held that though the negative income would be chargeable; for reason of it being negative there could be no tax leviable since that would also be a negative figure. It could only be understood as, when there is a loss, then there would be no payability of tax at all. In such circumstances, we are of the opinion that there could be no set off of the speculative business loss as against the income from other sources for the year, since the exception under the Explanation to Section 73 does not apply to the Company. 18. The learned Counsel for the respondent-assessee also has a contention that sub-section (2) refers to the specific assessment year in which it has to be applied. We cannot accept the said contention also, since the prohibition is insofar as sub-section (1) of Section 73, which provides that any loss in a speculation business shall not be set off except against profits and gains, if any, of another speculation business. This does not provide for looking at the profits and gains arising in each year in which the assessee is carrying on the business ..... X X X X Extracts X X X X X X X X Extracts X X X X
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