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2008 (7) TMI 618 - ITAT MUMBAILoss suffered on account of share trading as share broker - speculative or non-speculative - Treatment of software expenses. Loss suffered on account of share trading as share broker - speculative or non-speculative - business of share brokering and the main activity in this line of business is that of earning brokerage income from sale and purchase of shares - Applicability of Explanation to section 73 - HELD THAT:- On a bare perusal of this Explanation appended to section 73, it becomes clear that where any part of the business of a company other than those specified herein, consists of the purchase and sale of shares of other companies, such company shall be deemed to be carrying on a speculation business to the extent to which it consists of purchase and sale of shares - We are unable to accept ld. AR's point of view for the reason that the business of share-broker is to make purchase and sale of shares on behalf of the customers and earn brokerage therefrom. There is no stipulation or requirement for the broker to be directly engaged in the purchase and sale of shares at his own. Without making any purchase and sale of shares on his own account, a broker can very well carry on his business of brokerage from sale and purchase of shares on behalf of the customers. To contend that both these activities are tied in a single indivisible rope is wholly incorrect. The Hon’ble Calcutta High Court in Sun Distributors & Mining Co. Ltd.’s case [1990 (4) TMI 288 - CALCUTTA HIGH COURT] considered a case in which the assessee’s business was that of buying and selling of shares. In that case, it was held that section 73 will apply where any part of the business of the company consisted in the purchase and sale of shares of other companies. It was observed that it may be that in a particular year shares were only sold or in a particular year the shares were only purchased. The section did not require that both sale and purchase should take place in the same year. The shares may be purchased in one year and then sold in the subsequent year. The Hon’ble Court held that what was to be seen was whether the business of the company consisted in purchase and sale of shares. In that case, the company had a business of buying and selling the shares. The shares were treated as stock-in-trade. In these circumstances it was held that Explanation to section 73 was applicable. Coming back to the facts of our case, we observe that the assessee had shown share trading loss. There is no material on record to show that shares were held by the assessee as investment and not as stock-in-trade. On the contrary, the AO has recorded a categorical finding that the assessee was trading in shares. This finding has not been controverted by the assessee either before the first appellate authority or us - Therefore, we hold that the loss suffered by the assessee in the trading of shares is only speculative loss and cannot be set off against non-speculative income. The view taken by the ld. CIT(A), therefore, does not require any interference. Hence this ground fails. Treatment of software expenses - Revenue or Capital - No evidence was furnished before the authorities below in regard to the details of software acquired by the assessee - HELD THAT:- Ld. AR has placed reliance on three bills to contend that it is a revenue expenditure. From the perusal of the details as per the three bills, we find that this detail is incomplete as the total thereof is not matching with the figure claimed by the assessee as deduction on its account - Special Bench of the Tribunal in the case of Amway India Enterprises v. Dy. CIT [2008 (2) TMI 454 - ITAT DELHI-C] in which certain tests have been laid down for determining the character of such expenses. Since complete details of these expenses are not emanating from the orders of the authorities below nor they are before us, we therefore, cannot adjudicate on the question of deductibility or otherwise of such expenses. In this scenario, we set aside the impugned order on this score and remit this issue to the file of the AO for deciding it afresh in the light of the guidelines laid down in above noted order of the Special Bench, after allowing a reasonable opportunity of being heard to the assessee. In the result the appeal of the assessee is allowed for statistical purpose.
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