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TMI Blog2009 (3) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... Upadhyay, fo the Respondent. JUDGMENT The judgment of the court was delivered by F.I. REBELLO, J. - The Appellant a non-banking financial company has approached this Court against the order dated 13 th August, 2008 passed by the I.T.A.T. for the assessment year 2001-2002. The A.O. by his order had directed that loss of Rs.6,00,877/- in share trading, was a speculation loss by virtue of Explanation to Section 73 of the Income Tax Act, 1961. In respect of the said disallowance and on some other aspects, the assessee preferred an Appeal before C.I.T. (A). C.I.T. (A) by its order was pleased to observe that the business of the appellant consists of trading and investment in shares, debentures, bonds, mutual funds and other securiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts and in the circumstances of the case and in law, the Tribunal was correct in treating the loss Rs.6,00,877/- originating from and traceable simply and barely to the valuation of stock of shares as covered by the ken of the Explanation to Section 73 of the Act?" 3. At the hearing of this Appeal on behalf of the Appellant-Assessee, learned Counsel submits that in so far as Question (i) is concerned, the Explanation has to be read with Circular No.204 and if so read it would be clear that the object of the provisions 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. It is submitted that it is not the contention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ensure that in future, tax arrears do not accumulate; to rationalise the exemptions and deductions available under the relevant enactments, and to streamline the administrative set-up and make it functionally efficient." 7. The relevant provision of Section 73 as it now stands reads as under:- "73(1) Losses in Speculation business. - 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, if another speculation business. (2) ........ (3) ........ (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. Whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rein it uses the following expression:- "The amending Act has added an Explanation to Section 73 to provide that the business of purchase and sale or shares by companies which are not investment or banking companies or companies carrying on business of granting loans or advances will be treated on the same footing as a speculation business." 10. Learned Counsel, however, relies on paragraph 19.2. Paragraph 19.2 reads as under:- "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." It appears from this paragraph in the explanatory note in respect of the amending Act that the argument ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and sale of shares of any other companies and does not refer to losses suffered on account of book valuation. Our attention is invited to Section 43(5) which reads as under;- "speculative transaction" means transaction in which a contract for the purchase or sale of any commodity, including stocks and shares, is periodically or ultimately settled otherwise than by the actual delivery or transfer of the commodity or scrips." 12. Our attention is also invited then to Section 28 Explanation 2 which reads as under:- "Where speculative transactions carried on by an assessee are of such a nature as to constitute a business, the business (hereinafter referred to as "speculation business") shall be deemed to be distinct and separate from an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in Chainrup Sampatram (supra) for the purpose of considering the rational behind valuation of the stock at market whichever is earlier. 15. On the other hand on behalf of the Revenue the learned Counsel has drawn our attention to the finding recorded by the Tribunal as also to the observations in Sanjeev Woolen Mills (supra) to contend that there is nothing inconsistent in the said judgment of the view taken by the Tribunal. 16. In our opinion there can be no difference between the losses suffered in the course of trading by delivery and losses in terms of the book value. As long as the assessee is carrying on business of trading by way of purchase and sale of shares even if in respect of any financial year, there are no transact ..... X X X X Extracts X X X X X X X X Extracts X X X X
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