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2014 (4) TMI 481 - HC - Income TaxApplicability of Explanation to section 73 of the Act - Set off of interest on amounts borrowed for purchase of shares – Speculation business - Whether a particular company dealing in shares could be brought within the mischief of Explanation or saved by the excluded categories specified under the Explanation - Held that:- A company, whose principal business is that of banking or financing, is excluded from the provisions of Section 73 – the business of the assessee was finance and granting of loans and advances, which fell under the excepted clause in Explanation to Section 73 - merely because the loss is more than the income earned from the business of loans and advances, the AO would not be justified in looking at the results alone for the purpose of invoking Explanation to Section 73 of the Income Tax Act – Explanation to Section 73 is in the nature of deeming provision and has to be strictly construed - the onus is on the Department to show that the assessee falls within the mischief of the provisions Section 73. The Tribunal rightly observed that when the assessments for the years had become final, it is not open to the AO to disturb those findings in a subsequent assessment proceedings and hence the same was binding on the AO - there is no definition of the word "principal business", which is of relevance, particularly to a company carrying on the business of banking or granting loans and advances - in the absence of a definite definition of what a "principal business" is, one has to go only by the memorandum of articles of association of a company - its principal business is finance and granting loans and advances - The memorandum of the Company clearly points out the nature of business as an investment and finance company – Decided against Revenue.
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