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2016 (9) TMI 214 - HC - Income TaxSpeculation business - Getting the shares by allotment on application in Public Issue is purchase within the meaning of the word `purchase' under Explanation to Section 73 - Tribunal held that the sale of such shares becomes the speculation business under the said Explanation - Held that:- Allotment of shares by way of application in Public Issue has been held in Khoday Distilleries Ltd. Versus Commissioner of Income Tax and Anr. [2008 (11) TMI 16 - SUPREME COURT] under the Gift Tax Act which is a direct tax not amounting to be a transaction. Thus, the Apex Court has held that the same shall not amount to be purchase. The Tribunal has wrongly relied upon the decision of the Apex Court in the case of T.N. Arvinda Reddy (1979 (10) TMI 1 - SUPREME Court) which has nothing to do with the point at issue. As held in the decision in the case of Khoday Distilleries (supra) there is a vital difference between "creation" and "transfer" of shares. As stated hereinabove, the words "allotment of shares" have been used to indicate the creation of shares by appropriation out of the unappropriated share capital to a particular person. We are of the view that whichever rule of interpretation is followed, whether literal or object wise or purposive, the transactions of the assessee cannot imaginably be deemed to be a speculative business. Therefore the first question is answered in favour of assessee and against the revenue. When we have come to the conclusion that the allotment of shares cannot be termed as purchase, then the assessee cannot be said to be carrying on a speculation business to the extent to which the business consists of the purchase and sale of such shares. Thus it shall not be covered under Explanation to Section 73 and therefore the second question is also answered in favour of assessee.
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