TMI Blog2005 (10) TMI 425X X X X Extracts X X X X X X X X Extracts X X X X ..... t of share trading activities as business loss as against speculation loss assessed by the Assessing Officer under Explanation to section 73 of the Income-tax Act, overlooking the fact that primary activity of the assessee could only be determined by number of transactions, turnover, capital deployed, etc. Assessment year 1994-95 : 3. The assessee is engaged in the business of leasing, giving loans and advances and deriving service charges from the premises and also engaged in the business of purchase and sale of shares/securities. The Assessing Officer held that during this year under consideration the assessee mainly dealt in shares and securities and it is trading company and not investment company. He held that assessee is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e other income. However, the Assessing Officer did not accept the above view canvassed. Aggrieved by the above order, assessee approached the first appellate authority. 4. The assessee contended that assessee is a dealer in dyes and chemicals and also derived income from dividends, sub-letting the premises. It was contended that Assessing Officer went wrong in coming to the conclusion that Badla income did not arise out of loans and advances. It was submitted that the opinion given by the Institute of Chartered Accountants of India while interpreting section 272 of the Companies Act, governs the issue of investment and granting of loans and advances by the companies. It was submitted that assessee s main source of income is interest on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered view, the proviso to Explanation to section 73 is not applicable to the facts of the appellant s case inasmuch as the major source of income of the appellant during the year was out of interest and "BADLA" income. In view of the specific opinion given by the Institute of Chartered Accountants with regard to nature of Badla income, this in substance Badla income is fundamentally a nature of lending operation, goes to support the case of the appellant. Having come to this conclusion i.e. that Badla income is arising out of lending operations, the natural corollary will be that the major activity of the appellant company during the year was that of granting of loans and advances and therefore, the loss arising out of the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a person does not have necessary finance and he also does not want to square off the transaction by a corresponding sale. As per the settlement procedure of the stock exchange, the transaction had necessarily to be gone through and, therefore, he had to make payment for the delivery of shares. At this stage, the badla financier comes to provide the necessary finance through his broker and gets the said shares by way of security for providing necessary finance. He earns badla charges at the rates fixed by the Stock Exchange. The financier is not entitled to the profit or loss in respect of the shares he is entitled to badla charges. The learned counsel submitted that badla income is nothing but income earned in the course of granting loans a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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