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2017 (12) TMI 1054 - AT - Income TaxAdjustment of deemed speculation loss against non-speculative business income by invoking the explanation to section 73 - Held that:- We are of the view that both trading of shares are not coming under the preview of section 43(5) of the Act, which provides the definition of speculative transaction for the purpose of section 28 to section 41 of the Act. The fact that both delivery based transaction in shares and derivative transactions are non-speculative as per section 43(5) of the Act is concerned, it goes to confirm that both will have same treatment as regards to application of the explanation to section 73 of the Act is concerned which creates a deeming fiction. As in the present case, the assessee had undertaken cash/future arbitrage activity as one single business activity i.e. the position in a cash segment in a particular scrip is taken on a particular date and at the same time the reverse position is taken in the same scrip in F&O segment. The transactions in cash segment and F&O segment are inextricably linked with each other and are so interwoven that it is not possible to divorce these transactions and decide the nature of the income/loss. And hence, the loss suffered in cash segment, being an integrated part of the total arbitrage activities has to be allowed / set off against income from derivative segment. Accordingly, we confirm the order of CIT(A) allowing loss earned by assessee on account of purchase and sale of securities against income earned in derivative transactions. The issue of Revenue’s appeal is accordingly dismissed. Deemed dividend under section 2(22) - Held that:- On similar line, in assessee’s business, the learned Counsel explain that lending of money to the clients by settling their dues with exchanges. Parallel can also be drawn from the credit card business of banks, wherein advances to the customers are considered as lending activities. He explained that ABL has also earned interest income (delayed payment charges) from trade receivables amounting to ₹ 12.31 crores and ₹ 33.38 crores respectively during F.Y. 2008-09 and F.Y. 2009-10 which further increased to 57.92 crores during FY 2010-11. He stated that even if assessee exclude trade receivables from total capital employed, then also it will satisfy the Criteria that substantial part of the business of ASL was lending i.e. more than 20% of business. Accordingly, section 2(22)(e)(ii) specifically excludes from the scope of deemed dividend, the amount transferred by a company to a shareholder in the ordinary course of its business and where the lending of money is a substantial part of the business of the company. In view of the above, the learned counsel for the assessee fairly stated that the issue is squarely covered in favour of assessee and against Revenue in assessee’s own case or in group cases exactly on identical facts. When this was confronted to the learned CIT DR, he fairly agreed that in earlier years in assessee’s own and group cases the issue has been decided in favour of assessee.
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