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2006 (4) TMI 459 - AT - Income TaxSet off of speculation loss on share transaction - delivery of share has not been taken against the profit on non-speculative shares trading (delivery basis) - HELD THAT:- The provisions of the Explanation to section 73 have to be contrasted with the provision of section 43(5), which defines ‘speculative transaction’ to mean a transaction in which a contract for the purchase or sale of any commodity, including any stocks and shares, is periodically or ultimately settled otherwise than by the actual delivery or transfer of the commodity or scrips. The Explanation to section 73 treats any purchase and/or sale of shares by certain companies to be speculative for the purpose of section 73 only. For the purpose of setting off and carrying forward of loss, the buying and selling of shares by certain companies are regarded by the statute as speculation business, even though the transaction of purchase and sale was followed up by delivery of scrips and as such cannot be treated as ‘speculative transaction’ as defined in section 43(5). The phrase in the Explanation to section 73 ‘to the extent to which the business consisted of purchase and sale of such shares’ also does not indicate that the Legislature had several other actual and existing non-speculative activities of business in mind. It merely indicates that the business activity which consists of purchase and sale of shares will be treated as speculation business. If the entire business activity of a company consists of purchase and sale of shares of other companies, then the entire business will be treated as speculation business. But, if, apart from purchase and sale of shares, the company has other business activities, then those other activities will not be treated as speculation business. Similar issue has been decided by the Calcutta High Court in the case of COMMISSIONER OF INCOME-TAX VERSUS ARVIND INVESTMENTS LIMITED [1990 (3) TMI 5 - CALCUTTA HIGH COURT]. It has been held, in this case, that the Explanation to section 73 shall apply even to the case of a company whose only source of income is trading in shares - the Calcutta High Court decision is squarely applicable to the facts of the present case. Judicial propriety demands that a judgment rendered by the High Court must be followed in preference to the order of the Tribunal. The order of the learned Commissioner of Income-tax (Appeals) on this issue is confirmed - appeal of Revenue dismissed.
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