TMI Blog2013 (10) TMI 643X X X X Extracts X X X X X X X X Extracts X X X X ..... ember stands to incur or suffer in the course of his business - no loss could be incurred on such transactions, which may be so, but only to emphasize that a jobbing transaction could be entered into by a member even independent of and de hors the purpose of safeguarding self against losses that one is susceptible or prone to in the ordinary course of one's business, and in which case it would be speculative - Further, where and to the extent the assessee is unable to establish its jobbing activity as falling within the purview of s. 43(5)(c), the same, whether finally resulting in a profit or loss, being speculative by definition, would qualify as a separate and distinct business activity in terms of Explanation 2 to section 28 of the Act. It would be fit and proper that the matter is restored back to the file of the A.O. to enable the assessee an opportunity to present its case of the jobbing transactions, on which the impugned loss stands sustained by it, as non-speculative in terms of sec. 43(5)(c), and decide the same as per law by issuing definite findings of fact, having regard to the observations made in this order – Decided partly in favour of Assessee. - I.T.A. No. 18 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tivity, as the same in their view has not been incurred by the assessee, a member of the stock exchange, in the ordinary course of his business, whereby the business is undertaken only for and on behalf of the clients; the jobbing activity having been admittedly undertaken by the assessee on its own account. As regards Ground No.4, the same relates to the disallowance of expenditure attributable to the said speculation business, i.e., jobbing activity, which has been estimated at 50% of the total expenditure resulting in a disallowance of Rs.182.05 lacs. The same again has no basis in fact/s, and has been done in view of the assessee expressing its inability to furnish the turnover figures, i.e., of purchase and sale with regard to the jobbing activity, and which was for the reason that the stock exchange does not release such figures where the transactions are made by a member on its own account, crediting or charging him only the net amount. The said adjustments have thus resulted in gross injustice, by inflating the assessee's income for the year at Rs.249.57 lacs. 3.2 The ld. Departmental Representative (DR) would, on the other hand, rely on the orders of the authorities be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l delivery of goods manufactured by him or merchandise sold by him; or (b) a contract in respect of stocks and shares entered into by a dealer or investor therein to guard against loss in his holdings of stocks and shares through price fluctuations; or (c) a contract entered into by a member of a forward market or a stock exchange in the course of any transaction in the nature of jobbing or arbitrage to guard against loss which may arise in the ordinary course of his business as such member; shall not be deemed to be a speculative transaction.' In substance, therefore, the law per section 43(5)(c) provides exclusion to hedging transactions by a member of a forward market or a stock exchange entered into to guard against the loss that may arise to him in the course of his business, and toward which it stipulates jobbing and arbitrage transactions or a transaction of similar nature. What is important, in our view, is the purpose for which the law provides exclusion to otherwise speculative transactions, being non-delivery based, i.e., to guard against loss which may arise to a member of a stock exchange in the course of his business. The loss to such member in the ordinary cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not that on 'used': (pgs. 192,193) "15C. (1) Save as otherwise hereinafter provided, the tax shall not be payable by an assessee on so much of the profits or gains derived from any industrial undertaking to which this section applies as do not exceed six per cent. per annum on the capital employed in the undertaking, computed in accordance with such rules as may be made in this behalf by the Central Board of Revenue. (2) This section applies to any industrial undertaking which - (i) is not formed by the splitting up, or the reconstruction, of a business already in existence or by the transfer to a new business of building, machinery or plant previously used in any other business..." [emphasis, by underlining, ours] The words 'business as such member' in clause (c) of sec. 43(5) must therefore necessarily, i.e., in the context of the provision, be regarded as all contracts and transactions which the member is authorized to enter into, whether on his own behalf or on account of his clients, with rather only the former being relevant from the stand point of the provision inasmuch as the scope of loss arises only therein. We, therefore, consider the Revenue's said objection as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and distinct business activity in terms of Explanation 2 to section 28 of the Act. 5. In view of the foregoing, we only consider it fit and proper that the matter is restored back to the file of the A.O. to enable the assessee an opportunity to present its case of the jobbing transactions, on which the impugned loss stands sustained by it, as non speculative in terms of sec. 43(5)(c), and decide the same as per law by issuing definite findings of fact, having regard to the observations made in this order. The question of the expenses allocable to the jobbing activity, which would arise only where and to the extent the same is liable to be regarded as a separate business, being consequential and inextricably related, would also stand to be remitted likewise. An ad hoc approach in the matter is though discountenanced, and the allocation is to be based on some measurable, objective criterion, and toward which the assesse is to make out a case in consonance with the facts of its case. We decide accordingly. 6. In the result, the appeal of the assesse is partly allowed for statistical purposes. Order pronounced in the open court on October 11, 2013. - - TaxTMI - TMITax - Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
