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2013 (9) TMI 798 - AT - Income TaxBusiness loss or speculation loss - set off of share loss against income under other heads for the assessment year under consideration - Whether the share loss is to be considered as speculation loss or business loss of the assessee - Held that:- findings given by the AO is contrary in itself. On the one hand, AO has held that capital gain arising to the assessee u/s. 50 of the Act is not normal capital gain arising out of sale of investments and has considered it akin to business profit while considering applicability of the Explanation to Section 73 of the Act. Accordingly, AO has held that the share loss to the assessee is more than the income of the assessee under the head “interest on securities”, “income from house property”, “capital gains” and “income from other sources”. Therefore, assessee is not entitled to the exception as provided in explanation to Section 73 of the Act and, accordingly, considered the share loss to the assessee as speculation loss. On the other hand, AO while considering the set off of brought forward business loss of the earlier years, has held that it can not be allowed to set off of the capital gain computed under section 50 of the Act on the ground that said short term capital gain on sale of asset is capital gain and it is not a business income. In the first appeal, ld CIT(A) has held that capital gain arising u/s.50 of the Act should not be treated differently than the other capital gain. Ld CIT(A) has held that provisions of section 45 do not specify the capital gains arrived at u/s.50 to be treated differently. Thus, for all the purposes of Income tax Act, 1961, the capital gains arising u/s.50 of the Act have to be treated as capital gains only in quite normal sense and not otherwise. In view thereof, ld CIT(A) has treated the said short term capital gain computed u/s.50 of the Act as normal capital gain and has held that income of the assessee from capital gain and house property is more than the loss arrived at by the AO on trading of shares. Therefore, said share loss cannot be treated as speculation loss in view of exception to Explanation of Section 73 of the Act. Since ld CIT(A) has treated the capital gain computed u/s.50 of the Act as normal capital gain, he has also held that the unabsorbed business loss cannot be allowed to be set off against capital gain computed u/s.50 of the Act. Short term capital gain computed u/s.50 of the Act has been held by us as capital gain of the assessee and admittedly, the income of the assessee from capital gain and house property is more than the share loss computed by the AO, we agree with ld CIT(A) that Explanation to Section 73 of the Act is not applicable. Hence, the share loss cannot be deemed to be loss from speculation business in the assessment year under consideration. Therefore, we uphold the order of ld CIT(A) in directing the AO to allow set off of share loss against income under other heads for the assessment year under consideration. Consequently, action of the AO to apportion expenses towards speculation loss is also set aside as the same will form part of business expenses of the assessee, which are allowable as per provisions of the Act - Decided against Revenue.
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