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TMI Blog2004 (1) TMI 302X X X X Extracts X X X X X X X X Extracts X X X X ..... pplicability of the Explanation to s. 73 of the IT Act, 1961 and taxing of dividend income without setting off of the business losses. In the additional grounds, the ground No. (A) relates to asst. yr. 1995-96 wherein the dividend and interest income exceeds the amount of business loss and the applicability of Explanation to s. 73 has been challenged on this account also for asst. yr. 1995-96. The additional ground No. (B) relates to treating the dividend income separately under the head "income from other sources" instead of part and parcel of share trading activities. Additional ground Nos. (C) and (D) are factual and hence not admitted. Additional ground No. (E) relates to setting off of brought forward losses from the asst. yr. 1992-93 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant-company's case. In the case of Eastern Aviation Industries Ltd. vs. CIT (1994) 208 ITR 1023 (Cal), the company was having two businesses, i.e., share trading business and speculation in shares. It was contended that this case is distinguishable from the present case as the assessee has only one business of trading in shares effected with actual delivery of the shares. The judgment in the case of CIT vs. Amritlal Co. (1995) 125 CTR (Bom) 323 : (1995) 212 ITR 540 (Bom), is also distinguishable because in this case, it was held that a company engaged mainly in business or industrial activity cannot be held as an investment company mainly because in a particular year, its income from such business or industrial activity is lower tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g on pp. 28 and 29 of the paper book. In this case the company had positive income merely from house property and other sources and in that view of the matter, it was held that the assessee is an investment company and in view of exception contained in Explanation to s. 73, the assessee-company was held to be entitled to adjust the loss on purchase and sales of shares against other income. 5. As against this, learned Departmental Representative of Revenue argued that in all the years, the assessee had shown the shares as stock-in-trade and not as investment. Our attention was drawn to page Nos. 4 and 5 of the assessment order for asst. yr. 1994-95 wherein the AO has narrated all the facts from asst. yr. 1991-92 to asst. yr. 1994-95 and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business whether positive or negative is higher than the income from dividend and interest earned by the assessee in all the years except in the asst. yr. 1995-96. If the income from dividend is considered as income from other sources, then Explanation to s. 73 will not be applicable to the assessee in the asst. yr. 1995-96 but before coming to a conclusion in this regard, we have to decide whether the income from dividend in the present case shall be taxed under the head "income from business" or under the head "income from other sources" because as per additional ground raised by the assessee, the assessee has contended that the dividend earned is only a derivative of trading activities of shares and hence dividend income should be taxed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness loss and hence, the Explanation to s. 73 is applicable to the assessee in these two years. This issue is disposed of accordingly. 8. Regarding the second issue, i.e., whether the dividend income in this case should be taxed under the head 'income from other sources', we have already decided in the above para that the same is taxable under the head 'income from business' and accordingly, we direct the AO that income from dividend in all the three years shall be considered under the head 'income from business' and since the dividend has been earned out of the only business of the assessee, i.e., dealing in shares, the business loss shall be determined after considering the dividend income and only the net business loss in the two ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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