1985 (10) TMI 106

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..... ylinder and is a dealer in shares as well. The assessee initially claimed before the ITO speculation loss of Rs. 12,043 for the assessment year 1981-82 and Rs. 10,743 for the assessment year 1982-83. At the time of hearing, it was submitted on behalf of the assessee that the loss in shares was not a speculation loss but a loss as a dealer in shares. In this view of the matter, the ITO adjusted the loss in shares against income from dividend and determined the gross total income for both the years under appeal at a loss of Rs. 9,551 and Rs. 5,732, respectively. As a result, he negatived the claim for deduction under section 80M of the Income-tax Act, 1961 ('the Act'). 3. Being aggrieved, the assessee carried the matter in appeal before the .....

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..... the Commissioner (Appeals). The learned departmental representative, on the other hand, supported the order of the Commissioner (Appeals). 4.1 We have considered the rival submissions. The controversy falls in a very narrow compass and revolves round the true meaning of Explanation to section 73. The said Explanation reads as follows: "Where any part of the business of a company (other than an investment company, as defined in clause (ii) of section 109, 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 .....

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..... ction 73. 5. However, there is an exception which is inbuilt in the said Explanation. The said Explanation is not applicable to an investment company as defined in clause (ii) of section 109 or a company the principal business of which is the business of banking or the granting of loans and advances. 6. It is, therefore, clear to us that when any company carries on a business in purchase and sale of shares of other companies, the loss arising therefrom by fiction is to be treated as a speculation loss. However, such a company can escape the rigours of the said Explanation by showing that it is either an investment company or a banking company. Thus, the burden is on the assessee to claim exemption from the operation of the said Explanat .....

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