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TMI Blog1988 (12) TMI 141X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. Out of the total income so computed, there was business income of Rs. 65,079 and dividend income of Rs. 31,360 after allowing the deduction under section 80M. In the course of the assessment, losses carried forward from earlier years were not set off inadvertently. The assessee filed petition under section 154 on 1-3-1985 claiming set off of the losses carried forward. The ITO on scrutiny of the assessment records of assessment years 1976-77 and 1977-78 found that there were unabsorbed business losses of Rs. 26,623 and Rs. 87,752 respectively. Since there was a mistake apparent from the record, he passed an order under section 154 on 16-7-1985 wherein he allowed set off of the business losses of earlier years to the extent of business in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st from securities does not cease to be part of the income from business and hence liable to be set off against the losses of earlier years. He found that the assessee was dealing in shares and the shares which produced the dividend income were held by the assessee as its stock-in-trade. He was of the opinion that the dividend income should be considered as assessee's business income for the purposes of being set off against the business losses of the assessee brought forward from earlier years. However, he found a hitch in the said regard in view of the amendment brought to section 73 with effect from 1-4-1977. He held that the assessee-company could not be considered as an investment company as defined in section 109, since the major port ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely and any brought forward loss of a speculative business of earlier years is still to be carried forward in accordance with the provisions of section 73, Dis-satisfied with the order of the CIT(A) the assessee preferred the present appeal before the Tribunal. 4. The assessee's counsel filed a paper book of 8 pages and copies of assessee's letters dated 25-2-1985 and 1-12-1981 addressed to the ITO. His arguments were to the following effect : The assessment was completed on 29-10-1981. The assessee by its letter dated 1-12-1981 requested the ITO to keep the disputed demand of Rs. 35,642 in abeyance till the disposal of the appeal. By letter dated 25-2-1985 filed in the Income-tax Office on 1-3-1985 the assessee requested for rectificatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Rs. 65,079 and the income from dividend (before allowing deduction under section 80M of Rs. 47,040) was computed at Rs. 78,400. According to section 109(ii) of the Income-tax Act, 1961 'investment company' means 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". According to section 109(iv), 'gross total income' means total income computed in accordance with the provisions of this Act before making any deduction under Chapter VI-A. As the dividend income of Rs. 78,400 is more than the business income of Rs. 65,079, the assessee is an investment company and so the Explanation to section 73 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Supreme Court in 57 ITR 306. 7. We have considered the rival submissions and perused the papers filed before us and cases cited before us. The CIT(A) himself found as a matter of fact that the assessee was dealing in shares and the shares which produced dividend income were held by the assessee as its stock-in-trade. He also noted that in the two cases of the Supreme Court cited by the assessee in Chugandas Co.'s case and Cocanada Radhaswami Bank Ltd.'s case, it was held that although the interest on securities is to be assessed separately under a specific head yet if the assessee be a dealer in securities and the securities be held as trading assets the income by way of interest from securities does not cease to be part of the incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1961. So the CIT(A) should have compared the figures of Rs. 65,079 charged as business income and Rs. 78,400 being dividend income charged as "income from other sources", of 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". If such a comparison is done the assessee has to be treated as an investment company because its gross total income of Rs. 96,189 consisted mainly of dividend income of Rs. 78,400 before deduction u/s 80M, assessed under the head "income from other sources". When the assessee-company has to be treated as an investment company the Explanation to section 73 would not appl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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