TMI Blog2004 (1) TMI 327X X X X Extracts X X X X X X X X Extracts X X X X ..... s of purchase and sale of shares on behalf of its clients. The AO noticed that the assessee had claimed deduction of an expenditure of Rs. 25,000 on account of Delhi Stock Exchange fine account. The AO disallowed the said expenditure noticing that the same was incurred by the assessee on account of its failure to comply with the rules and regulations governing its business and as such, it could not be said to be an expenditure incurred in the normal course of carrying on of its business. Aggrieved by the order of the AO, the matter was carried in appeal before the CIT(A) who has since allowed the claim of the assessee. Presently, the Revenue is in appeal before us. After hearing the rival submissions on the issue, we are of the view that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of Rs. 3,42,060 on such transactions. The assessee was asked to explain as to why the loss suffered by the assessee should not be treated as a speculative loss. The assessee explained by means of written submissions before the AO that on some occasions, the loss on the share transaction was consequent to a breach of contract by the client and the same could not be said to be speculative loss. Secondly, it was also explained that in certain situations, a broker also acts as a jobber and the jobbing transactions are inherent in the business of share broking and the same is also not to be viewed as a speculative loss. The assessee also worked out the details of certain transactions, which resulted into excess of debit in the account of diffe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transactions were inherent in the broking business and the AO had failed to appreciate the same in proper perspective. The CIT(A), after considering the aforesaid submissions, has upheld the view of the assessee with regard to the loss incurred by the assessee on account of breach of contract of Rs. 2,04,860 and on job transaction amounting to Rs. 96,925. The balance of Rs. 40,275 was sustained as speculation loss. Hence, the present appeal of the Revenue against the action of the CIT(A) in upholding the stand of the assessee to the extent of Rs. 3,01,785. 9. The learned Departmental Representative, Shri R.R. Prasad, appearing on behalf of the Revenue, has defended the orders of the AO and the arguments advanced by him were in support of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he following lines. 12. At the outset, we may state that the Revenue has to fail for the reasons discussed hereinafter. 13. The two facets of the issue before us relate to: (a) loss as a result of the breach of contract by the clients; and (b) loss suffered on account of jobbing transaction. The order of the CIT(A) on this issue is quite illustrative, a portion of which we reproduce as under: "I have considered the arguments of the learned counsel. As regards the loss on account of breach of contract, the Hon ble Delhi High Court in the case of Bhagwan Dass Rameshwar Dayal held that one can visualise a number of situations in which there may be no delivery for various reasons, i.e., because of failure of the party on account of insolv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as business loss. Even if the arguments of the AO are accepted that such loss suffered by the appellant was on account of self-trading, still the loss cannot be termed as speculation loss. In normal terminology, the share trading business on behalf of oneself is known as jobbing. Sec. 43(5) defines the word speculative transaction, but there are three exceptions to it. The proviso (c) to s. 43(5) reads as under: A contract entered into by a member of forward market or a stock exchange in the course of any transaction in the nature of jobbing or arbitrage to hedge against loss which may arise in the ordinary course of his business as a member. This proviso makes it very clear that any profit or loss on account of jobbing will not be in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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