9911796707
TMI Blog1996 (3) TMI 159X X X X Extracts X X X X X X X X Extracts X X X X ..... 4,84,649. The Commissioner objected to this course of action and issued a notice under section 263. 2. Before the Commissioner it was explained that as per the Explanation to section 73 of the Income-tax Act, the assessee-company shall be deemed to be carrying on the speculation business and so the AO was justified in setting off the speculation loss of Rs. 8,50,004 against the trading profit of Rs. 4,84,649 which under the Explanation to section 73 has to be regarded as speculation profit. The Commissioner did not agree with this contention. According to him, the Explanation to section 73 is only of a clarificatory nature and only losses in respect of purchase and sale of shares by certain companies shall be deemed to be speculation losse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scope of the meaning of the term speculation as given in section 43(5) r/w Explanation 2 to section 28. A speculative transaction under section 43(5) is one where the contract is settled without deliveries. Under Explanation to section 73, even if there are deliveries, it is deemed as a speculation business. 4. It is contended by the ld. counsel for the assessee that according to the CIT, if there is a profit in the normal speculation business, it could be set off against the loss in share trading business under Explanation to section 73 whereas reverse position is not possible. A loss in a normal speculation business cannot be set off against the profit from trade in shares under Explanation to section 73. It is pleaded that there is no b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y CIT as Non-Speculation profit). " 5. We find considerable force in the contentions of the learned counsel. The relevant portion of section 73 and the Explanation reads as follows : " Losses in speculation business 73. (1) 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, of another speculation business. (2) to (4) -- -- --- " 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and the loss has to be set off or carried forward and set off under section 73. In a different situation, there may also be profit or loss in the normal business which is deemed to be speculation business in terms of the Explanation and the loss from the business may also have to be set off or carried forward and set off. In either of the situations, the business covered by the Explanation has to be deemed to be speculation business and the loss or profit from this business has to be regarded as speculation loss or profit and as such these results are to be treated within the parameters of section 73. This is the plain meaning of the language of the section and we are not made aware of any judicial decision to the contrary. In these circu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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