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TMI Blog1990 (5) TMI 63X X X X Extracts X X X X X X X X Extracts X X X X ..... at a higher rate earlier and sold them at a lower rate later and thus incurred losses as claimed and as mentioned above. The ITO disallowed the losses claimed by the appellant-company by holding that the losses incurred are bogus. The appellant-company's contention is that the ITO completely ignored the relevant evidence in connection with the purchases and sales of shares. He has arrived at a conclusion that the claim of losses is bogus on mere surmises and conjectures. 4. The appellant-company being aggrieved by the order of disallowing the claims of losses of the appellant-company by the ITO went in appeal before the CIT(Appeals).The CIT(Appeals) agreed with the action adopted by the ITO in disallowing the claims of losses made by the appellant-company by giving his own reasons. The CIT(A) has confirmed the disallowance made by the ITO. The appellant-company being further aggrieved preferred these appeals before the Tribunal. 5. In the light of the evidence and material facts on record the only question which has arisen for our consideration is whether the losses claimed by the appellant-company in the trading of shares is genuine or the losses claimed by it is bogus. To gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fferences. Such procedure is possible only in other security and shares which are not classified as hand delivery shares. 8. The ITO also observed that the purchases were made at peak price and sales were effected at lowest price. The ITO has made such observation after noting the fluctuations in the prices of the shares on the dates of purchases and sales. A question arises that, can the ITO say what would be the peak price or the lowest price of a particular share on a particular day, say on 1-6-90. When a broker enters the floor of the Stock Exchange on a particular day, he is guided by the prices prevailing on the earlier days and he has to decide at what rate to purchase or to sell the shares. He cannot know or does not know whether he is purchasing at peak price or selling at the lowest price until the time for the transaction is over. The trading in Calcutta Stock Exchange is from 12 noon to 2-30 p.m. 9. The ITO further observed that the sales of shares without any possession of them amounts to speculative transactions and the loss resulting in them is inadmissible against other income. The definition of 'speculative transaction' at section 43(5) of the IT Act, 1961 is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payee cheques. These are not mere peak transactions or entries. How can any person know at the particular moment on the day of the transaction the price movements of a particular company's shares when he purchases and sells, watching the rates quoted at a particular point of time, either he purchases or sells. Only at the end of the day he can know whether the prices paid or received by him is the peak or the least. 14. The CIT(Appeals) further alleged that, in respect of transaction of 25,800 shares of Escorts Ltd., Surendra Co. received a commission of 25 paise per share for giving the resemblance of genuineness to the transaction. He has not brought any evidence on record nor pointed out to any evidence on record brought by the ITO in this respect. This is his fertile imagination only. 15. The CIT(Appeals.) confirmed the disallowance of Rs. 39,150 on sale of 9000 shares of Texmaco on the ground that delivery given and taken was on the same date and payments and receipts were made on the same date. Our observations above in regard to the transaction of shares of Tata Tea hold good here also. 16. In respect of transaction of 9900 shares of Hindusthan Motors Ltd. the CIT(Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns in that behalf contained in these bye-laws and regulations shall be void :-- (i) Contracts for the clearing any other cleared securities ; (ii) Contracts for a period beyond the current and ensuing clearing in cleared securities ; (iii) Contracts for options in securities ; (iv) Contracts for the purchase and sale of prospective dividends ; (v) Contracts for the purchase or sale of securities, the period for payment or delivery which is beyond 14 days ; and (vi) Contracts (other than a specific bargain) for the purchase or sale of securities dealings in which are not permitted on the exchange. " These provisions have been put on the member or members under the head-note " void contracts " under Chapter XIX. 20. The assessee's learned counsel Sri G.N. Singh has drawn our attention to bye-law 197 reading as under :-- " The exchange does not recognise as parties to any bargain in the market any parties other than its own members and every member is directly and primarily liable to every other member with whom he effects a bargain for its due fulfilment in accordance with the rules, Bye-laws and regulations of the exchange whether such bargain be for account of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement between the assessee and the brokers from whom purchases are made and the brokers to whom sales were made to meet any legal obligation of the assessee under any Act. In the case of Associated Rubber Industry Ltd. Anil Holdings Ltd. was set up and created by it. The shares were transferred to it and the dividends were debited to it. In the assessee's case there is no such creation of another legal entity. 25. In the light of the above discussed facts, the relevant evidence on record and by taking into consideration the arguments advanced, on behalf of both the parties we are of opinion that the Revenue has vainly tried to take benefit of bye-laws and regulations of the Calcutta Stock Exchange Association Ltd. In fact, the bye-laws relied on on behalf of the Revenue do not support their contention. The relevant evidence on record does not allow us to draw the inference that the share transactions effected by the assessee-company by way of purchasing and/selling of shares are not genuine. We have discussed in detail that the ITO has not pointed out any instance that on a particular day the rates of sales of shares were higher than the rates at which the assessee-company has so ..... X X X X Extracts X X X X X X X X Extracts X X X X
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