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2006 (5) TMI 134 - AT - Income TaxApplicability of Sec 73 - In Speculation Business - loss on sale of TISCO shares - Difference Of Opinion between learned Members - Third Member Order - Whether, the loss arising to the assessee is to be treated as speculation loss within the meaning of Explanation to section 73, or to be treated as loss arising on transfer of a capital asset as claimed by the assessee? - HELD THAT:- In the present case the Assessing Officer did not bring any material on record to show shares were purchased as an adventure in nature of trade nor showed that any of factors considered by Courts to take a transaction as an 'adventure' were satisfied in this case. The position did not change in the appellate proceedings and therefore without evidence it is difficult to hold that sale/purchase of shares of TISCO by the assessee was an adventure in nature of trade or it was business or part of business. The Explanation to section 73 is part of section 73 and by fiction makes purchase and sale of other companies by a company itself speculation business. As the Explanation creates a fictional solution, it is required to be construed in a narrow sense. There is no indication that "business" as per the Explanation can be given a meaning different from meaning given under the main section. Further the Explanation uses terms "gross total income", "income under the heads" like "Interest on securities", "Income from house property", etc. etc., making it absolutely clear that "part of business" means part of such business where income is computable under the head "Business". The Explanation provides for set off and adjustment of income/loss of particular type of business mentioned in the Explanation. Having regard to clear language, there is no need in my view to speculate what is the import of word "business" in the Explanation. There is no question drawing any sort of presumption, either in favour of carrying business or against it. The ld AM is right in holding that even capital assets held by company were business asset. This is the position when word "business" is considered in a wider sense. Every transaction carried on by the assessee relating to its asset cannot be treated as a transaction, liable to be assessed under the head "Business". It may give rise to capital gain or income assessable under the head "Other sources". The company can also have receipt of casual and non-recurring nature. The computation of income has to be done as per the machinery and rules provided by the Income-tax Act and not on general notion of term "business". Both the Members have held that shares of TISCO were held by the assessee as an investment. It was not part of trade. Therefore the profit or loss suffered, subject to other provisions, is taxable under the head "Capital gains" and not as "Business income". In the light of accepted position by both the Members that shares of TISCO were held and sold by assessee as a capital asset (investment), the loss accruing to the assessee was liable to be assessed as short-term capital loss. Therefore, there was no question of treating it as a speculation loss by applying Explanation to section 73 of the Income-tax Act. The ld JM did not agree with the proposed order of the learned Accountant Member. He was of the view that loss arising to the assessee on sale of shares was short-term capital loss. Thus, I agree with the view proposed ld JM. The case should now be put before the regular Bench, for disposal, in accordance with law.
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