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2014 (10) TMI 659 - AT - Income TaxScope of Explanation to sec. 73 – Deemed speculative loss or not - Whether delivery based share trading loss come under the ambit of Explanation to sec. 73 of the Act or not – Held that:- The assessee is engaged in the business of share trading which involves stock and share broking activities, purchase and sale of delivery based shares and purchase & sale of non-delivery based shares i.e., derivative trading - assessee incurred loss on delivery based purchase and sale of shares and earned profit on non-delivery based sale purchase of shares - both trading of shares and derivative transactions are not coming under the purview of Section 43(5) of the Act which provides definition of "speculative transaction" exclusively for purposes of section 28 to 41 of the Act - both delivery based transaction in shares and derivative transactions are non-speculative as far as section 43(5) is concerned goes to confirm that both will have same treatment as regards application of the Explanation to Section 73 is concerned, which creates a deeming fiction. Before application of the said Explanation, aggregation of the business profit/loss is to be worked out irrespective of the fact, whether it is from share delivery transaction or derivative transaction – relying upon assessee’s own case as decided in Commissioner of Income Tax, Kol-III Versus M/s. Baljit Securities Pvt. Ltd. [2014 (6) TMI 475 - CALCUTTA HIGH COURT] - where an assessee, being the company, besides dealing in other things also deals in purchase and sale of shares of other companies, the assessee shall be deemed to be carrying on a speculation business - The assessee is a share broker, as already indicated - The assessee is also in the business of buying and selling of shares for self where actual delivery is taken and given and also in buying and selling of shares where actual delivery was not intended to be taken or given - the entire transaction carried out by the assessee was within the umbrella of speculative transaction - There was no bar in setting off the loss arising out of derivatives from the income arising out of buying and selling of shares – thus, the order of the CIT(A) is upheld – Decided against revenue. Invocation of section 14A – Held that:- A plain reading of Rule 8D(2)(ii) and (iii) can only be applied, in the situations, wherever share are held as an investment and this rule will not have any application when the shares are held as stock in trade – relying upon DCIT Vs. Gulshan Investment Co. Ltd. [2013 (3) TMI 393 - ITAT KOLKATA] - the provisions of Rule 8D(2)(ii) and 8D(2)(iii) of the I.T. Rules, 1962 will not be attracted to dividend earned from shares held as stock in trade - the provision of section 14A are indeed attracted whether or not the shares are held as stock in trade or as investments, even though the provisions of rule 8D2(ii) and (iii) cannot be invoked in such a case, and even though the provisions of rule 8D2(1) are much narrower in scope than the scope of section 14A simplicitor – thus, the order of the CIT(A) is upheld – Decided against revenue.
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