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TMI Blog2021 (4) TMI 847X X X X Extracts X X X X X X X X Extracts X X X X ..... ents Ltd [ 1990 (3) TMI 5 - CALCUTTA HIGH COURT] relied by Ld. CIT(A) are at variance. In the said case Tribunal held that the sole business of the company was in share dealings. As accepting the assessee s contention it held that where a part of the business of a company consisted of the purchase and sale of shares, then only the Explanation to section 73 would come into play and not otherwise when the sole business of the company was in share dealings. However, the facts in the present case is entirely differ that is income shown by assessee is mainly consist of income from other sources. We found that the income shown by assessee is mainly consist of income from other sources of 94,28,211/-. Thus, in our view the assessee fall within the purview of Section 73 of the Act, accordingly, ground no.1 to 3 of assessee are allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... ome from 'business and profession' of ₹ 70,94,288/-, 'capital gain' of ₹ 1,47,843/- and income from 'other sources' of ₹ 94,28,211/-. The total income consist mainly income which is chargeable under the head income from 'other sources' and 'capital gain' of ₹ 95,76,054/-. Thus, the assessee is deemed to be not carrying on speculation business for the purpose of section 73(1) of the Act. The assessee also relied on various case laws. The submission of assessee was not accepted by the Assessing Officer(AO) by taking view that assessee total income consist of ₹ 79,43,244/- under the head income from other sources and ₹ 70,94,288/- under the head Profit and Gain from 'business and profession'. Thus, explanation to section 73 of the Act will applicable only when the assessee's gross total income consist mainly income which is chargeable under the head "Interest on Securities", income from house property, capital gains and income from other sources. The assessee's gross total income consist of Profit and Gain of business of ₹ 70,94,288/- and income from other sources of ₹ 79,43,244/-. The AO further held that it may not be said that assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee relied upon the decision of Hon'ble Bombay High Court in CIT Vs. Darshan Securities Pvt. Ltd., in ITA No.2886 of 2009 dated 02.02.2012 and the decision of Hon'ble Kolkata Tribunal in ITO vs. Dharmjyoti Vinimay Pvt. Ltd., [2004] 3 SOT 902 (Kol). 6. The ld.AR further submits that the Hon'ble Bombay High Court in Darshan Securities (supra) held that in order to determine whether the exception carved out by the explanation to Section 73 of the Act, the legislature had first mentioned of computation of gross income of the company. The word consist mainly are indicative of the fact that legislature had in its contemplation that gross total income consist predominantly income from four heads that are referred to therein. In computing gross total income, the normal provisions of Act must be applied and it is only thereafter, i.e. has to be determined as to whether the gross total income so computed consist mainly of the income which is chargeable under the head referred to in the explanation. 7. On the other hand, the Departmental Representative (Sr. DR) for the Revenue supported the order of Lower Authorities. The Sr.DR further submits that the CIT(A) in para 6.1.4 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;ble Bombay High Court while affirming the decision of the Tribunal held that gross total income of assessee was required to be computed inter-alia by computing the income under head profit and gain of business and profession as a whole, both the income from service charges in the amount of ₹ 2.25 crore and loss in share trading of ₹ 2.23 crore would have to be taken into account in computing the income under that head, both the being sources under the same head. Further, the assessee has a dividend income of ₹ 4.7 lakhs under the head income from other sources, thus, the Tribunal was justified in coming to the conclusion that assessee falls within the purview of exception carved out in explanation to Section 73 of the Act and assessee would not be deemed to be carrying on speculation business for the purpose of Section 73(1) of the Act. For completeness of this order, the relevant part of decision referred below: "5. Under Section 28, income which is chargeable to income tax under the head of profits and gains of business or profession includes the profits and gains of any business or profession, which was carried on by the assessee at any time during the previ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f such shares." 6. The explanation to Section 73 introduces a deeming fiction. The deeming fiction stipulates that where any part of the business of a company consists in the purchase and sale of shares of other companies, such company shall, for the purposes of the section be deemed to be carrying on a speculation business to the extent to which the business consists of the purchase and sales of such shares. The deeming fiction applies only to a company and the provision makes it clear that the deeming fixation extends only for the purposes of the section. The bracketed portion of the explanation, however carves out an exception. The exception is that the provision of the explanation shall not apply to 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 whose principal business is of banking or the granting of loans and advances. 7. The submission which has been urged on behalf of the Revenue is that in computing the gross total income for the purpose of the explanation to Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplying the provisions of Section 73(1) to determine whether a company is carrying on speculation business would reverse the order of application. That would be impermissible, nor, is it contemplated by Parliament. For, the ambit of Sub Section (1) of Section 73 is only to prohibit the setting off of a loss which has resulted from a speculation business, save and accept against the profits and gains of another speculation business. In order to determine whether the exception that is carved out by the explanation applies, the legislature has first mandated a computation of the gross total income of the Company. The words "consists mainly" are indicative of the fact that the legislature had in its contemplation that the gross total income consists predominantly of income from the four heads that are referred to therein. Obviously, in computing the gross total income the normal provisions of the Act must be applied and it is only thereafter, that it has to be determined as to whether the gross total income so computed consists mainly of income which is chargeable under the heads referred to in the explanation. 9. Consequently, in the present case the gross total income of ..... 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