TMI Blog2016 (6) TMI 1156X X X X Extracts X X X X X X X X Extracts X X X X ..... de, Sr DR For The Assessee : Shri Sunil Talati, AR ORDER PER R.P. TOLANI, JUDICIAL MEMBER:- This appeal by the Revenue is directed against the order of the Commissioner of Income-Tax (Appeals)-XIV, Ahmedabad dated 29.03.2012 for Assessment Year 2008-09. 2. The solitary ground raised is as under:- The Ld. Commissioner of Income-tax (A) has erred in law and on facts in directing the Assessing Officer to treat the loss of ₹ 2,41,25,719/- shown by the assessee as business loss, as against speculation loss as treated by the Assessing Officer. 3. The facts concerning the dispute in question and the observations of the ld. AO relevant to the issue are depicted in paragraph Nos. 4.3 4.4 of the Assessment Order which read as under:- 4.3 A perusal of the B/S and the P L A/c of the assessee shows that the assessee is dealing mainly in the trading of shares. Also parts of its shares are shown as investment and are accordingly charged to tax under the head Capital Gains . During the year under consideration the assessee had purchased shares worth ₹ 45.16 Crores. The said shares were then sold off for ₹ 41.97 Crores, thereby incurring ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lcutta High Court in the case of CIT vs. Arvind Investments Ltd. [1991] 192 ITR 365 (Cal.) has clearly held that nowhere has any indication been given in the circular that where the only business of a company consists of purchase and sale of shares, the Explanation to section 73 would not apply. 4. Thereafter, the ld. AO, relying on various case laws, disallowed the assessee s loss in shares by invoking Explanation to Section 73, by observing as under:- 4.6 In view of the above facts and circumstances of the case and the case laws relied upon the entire business loss of the Company is treated as speculation loss, within the meaning of Explanation to Section 73. The assessee is not allowed to set off this speculation loss against any business income in the later years. Also as per the provisions of the Act, the assessee is allowed to avail the carry forward of losses only for a period of four years as provided in the Act. Penalty proceedings u/s 271(1)(c) of the Act are initiated separately for furnishing inaccurate particulars of income. 5. Aggrieved, the assessee preferred first appeal, where ld. CIT(A) held that Explanation to Section 73 as invoked by the ld. AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded for the purpose of deeming to be carrying on the speculation business. The use of word 'or' between the comas clearly changes the categories which have been mentioned in the explanation. The companies mentioned before the word 'or are exempted from the deeming fiction as that category starts with the words 'other than the company'. The companies mentioned after the word 'or' are covered by the deeming fiction as it does not begin with the exclusion clause. In view of the above analysis, I am inclined to agree with the submission of the appellant. The appellant is doing the business of trading in shares and securities and is also having income from other sources and, therefore, Explanation to Section 73 will not be applicable in the case of the appellant to treat the loss as speculation loss. The claim of the appellant is accordingly allowed and the A. O. is directed to treat the loss shown by the appellant as business loss. The ground of appeal is accordingly allowed. 6. Aggrieved, the Revenue is now in appeal before us. 7. Ld. DR relied on following judgments: i. R. P. G. Indus Ltd. v. ACIT ; 85 ITD 105 (Cal) TM ii. Melville F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act would cover both shares which are stock-in-trade and shares which are traded for the purpose of considering the profit and loss for the year. 5.6.11 In our humble view, drawing support from the judicial pronouncements cited at paras 5.6.3 to 5.6.9 of this order (supra) we are of the considered opinion and hold that the amendment inserted in Explanation to section 73 of the Act by Finance (No. 2) Act, 2014 w.e.f. 01.04.2015 is clarificatory in nature and would therefore operate retrospectively from 01.04.1977 from which date the Explanation to section 73 was placed on the statute since this amendment to section 73 of the Act '.... or a company the principal business of which is the business of trading in shares .....' brings in the assessee whose principal business is trading of shares. Therefore, the loss incurred in share trading business by such companies, i.e. like the assessee will not be treated as speculation business loss but normal business loss, and hence the same loss can be adjusted against other business income or income from any other sources of the year under consideration. In this view of the matter, we direct the AO to allow the assessee's c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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