TMI Blog1999 (12) TMI 110X X X X Extracts X X X X X X X X Extracts X X X X ..... ofit loss A/c 23,94,860 Rs. Add : Inadmissible expenditure (a) Depreciation to be considered separately 5,26,830 (b) Travelling expenses incurred in excess of Rule 6-D 5,762 (c) PF delayed payments debited to P L A/c 72,836 (d) Donations 5,000 6,10,428 ----------------- ------------------ 31,05,288 Less : 1. Depreciation as per I.T. Act 4,34,598 2. Share of income from partnership firm being exempt 5,22,497 9,57,095 -------------------- ----------------- 21,48,193 Less: Unabsorbed Depreciation brought forward from A.Y. 1996-97 13,65,840 -------------------- Profit 7,82,353" -------------------- 3. The appellant-company is engaged in the construction business and for the accounting year under reference, the appellant had received contract receipts from power projects to the extent of Rs. 21,00,38,488. In addition, the appellant had earned other income amounting to Rs. 29,63,444 which comprises of interest receipt of Rs. 75,798, lease rental income of Rs. 20,89,200, share of profit from firm at Rs. 5,22,497, misc. income of Rs. 1,48,200 and dividend income of Rs. 1,27,755. This income was also credited to Profit Loss A/c. Against the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess as furnished in the return of income, it is learnt that the assessee is not a company whose gross total income consists mainly of income which is chargeable under the heads "interest on securities", "income from house property", "capital gains", "income from other sources" and this is not a company, the principal business of which is the business of banking or the granting of loans and advances, within the meaning of Explanation to section 73 of the Income-tax Act, 1961. In view of the above, loss on sale of shares amounting to Rs. 1,60,33,083 in the instant case is the loss from speculation business which has to be set off only against income from speculation business during the year or has to be carried forward and set off against the income from speculation business of subsequent years as per the provisions of section 73 of the Income-tax Act. The claim of the assessee made for set off of loss of Rs. 1,60,33,083 against Profit Gains of Business, otherwise, than the speculation business is not allowable and, hence, adjustment of the same is made under clause (iii) of first proviso to section 143(1)(a). Additional tax under section 143(1A) is being levied as per the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing an adjustment under section 143(1)(a) of Income-tax Act. He also rejected the appellant's contention that the entire income of the appellant for the assessment year under reference was income from "other sources". He also rejected the contentions of the assessee that while computing loss on share transactions, only loss of Rs. 6,26,225 relating to purchase and sale of shares could be treated as speculation loss and balance loss of Rs. 1,54,06,858 on account of valuation of closing stock on market price or cost whichever was less is to be ignored. He noted that the appellant was a dealer in shares. Therefore, while working out the profit or loss on share dealings, opening or closing stock form integral part of computing the Profit Loss A/c. Accordingly, the learned CIT(A) upheld the action of the Assessing Officer in making the adjustment of the nature mentioned above. This is subject matter of the present appeal. 7. The learned counsel contended that as per the provisions of section 143(1)(a), adjustments could be made only in respect of specified items. He further argued that the scope of adjustment is restricted to only such arithmetic errors which are prima facie made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aside and the adjustment made by the Assessing Officer under section 143(1)(a) be deleted. 8. On the other hand, the learned Departmental Representative strongly relied on the order of the CIT(Appeals). He further submitted that in Part-IV of the return, the appellant had indicated the nature of business as construction, hire purchase, leasing and trading in shares. The entire profit for the assessment year under reference was shown under the head "profit and gains from business". The fact that the appellant was a dealer in shares. It is evident from the audited accounts. The learned Departmental Representative drew our attention to Schedule-G of the audited accounts which indicated the value of shares as stock-in-trade. He argued that the shares were not held as investments. Besides, the appellant had itself treated the entire loss of Rs. 1,60,33,083 on account of share transactions including valuation of closing stock of shares as business loss. Considering the fact that the appellant is not a company whose gross total income consisted mainly of income chargeable under the heads "interest on securities", "income from house property", "capital gains" and "income from other sourc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paras, the entire income of Rs. 7,82,353 disosed in the return was under the head "profit and gains" from business. In part-IV of the return, the appellant had inter alia indicated the nature of business or profession, construction, hire purchase, leasing and trading in shares. In the return, the appellant had not shown any income under the heads "interest on securities", "income from house property", "capital gains" and "income from other sources". It is not the claim of the appellant that it is a banking company engaged in the business of banking or granting of loans and advances. The appellant is carrying on business of trading in shares and it is further evident from Schedule I and Schedule-G of the audited accounts which indicate that the appellant had held shares of 30 companies as stock-in-trade. The value of closing stock of shares for the accounting year under reference was to the tune of Rs. 5,36,26,122. The entire information to this effect is available from the Income-tax return and the accounts filed with the return of income. The appellant does not fall in the category of exceptions mentioned in Explanation to Section 73 of Income-tax Act. If we exclude the exceptio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 143(1)(a), the Assessing Officer was duty bound to examine this aspect as to whether loss arising from share transactions was correctly adjusted against business profit or not. Since the appellant had adjusted the entire loss of Rs. 1,60,33,083 and not of Rs. 6,26,225, the Assessing Officer was justified in treating the entire loss as speculation loss. It may also be mentioned that there cannot be any controversy as made out by the appellant that the loss on share transactions has to be determined by excluding the value of closing stock of the shares. it is only made out by the appellant to wriggle out the rigours of Explanation to section 73 of Income-tax Act. 13. We have also carefully considered the decision of Income-tax Appellate Tribunal, Bombay Bench in the case of Trade Team (P.) Ltd.'s case. But, the decision in that case is not applicable to the facts of the present case. In that case, the assessee was not a dealer in shares and there was a solitary transactions of purchase and sale of shares. The shares were held as investment for a period of 3 years and thereafter sold. Loss suffered on this account was claimed as a short term capital loss. In the light of these facts ..... X X X X Extracts X X X X X X X X Extracts X X X X
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