TMI Blog2010 (12) TMI 750X X X X Extracts X X X X X X X X Extracts X X X X ..... lly provided - As already discussed, even business loss in speculative transactions cannot be set off against other business income or income from other sources, except as may be expressly provided Rent admittedly was payable to the assessee and brokerage was an independent transaction envisaging payment to the broker - Wherever deductions out of income from property are permissible, the same have been specified in section 24 - the appeal is dismissed - IT APPEAL NO. 429 OF 2007 - - - Dated:- 9-12-2010 - ADARSH KUMAR GOEL, AJAY KUMAR MITTAL, JJ. Ms. Radhika Suri for the Appellant. Ms. Urvashi Dhugga for the Respondent. JUDGMENT Adarsh Kumar Goel, J. ‑ This appeal has been preferred under section 260A of IT Act, 1961 (hereinafter referred to as "the Act") by the assessee against order dated 4th May, 2007 of the Tribunal, Chandigarh Bench, passed in ITA No. 366/Chd/2002 in respect of assessment year 1997-98. 2. The assessee derives income from business, from house property as also from speculative transactions. It claimed set off of loss suffered on sale and purchase of shares covered by the definition of speculative transactions under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be allowed as an expenditure under house property income." 3. The CIT(A) accepted the plea of the assessee on the question of brokerage but the Tribunal reversed the same and restored the order of the AO. The findings recorded by the Tribunal are as under : "We have given our careful consideration to the rival submissions. The finding of fact recorded by the Revenue authorities that the loss has been incurred by the assessee on the sale of purchase of shares without actual delivery of the scrips has not been challenged before us section 43(5) defines speculative transaction as under : '43(5) 'speculative transaction' means a transaction in which a contract for the purchase or sale of any commodity, including stocks and shares, is periodically or ultimately settled otherwise than by the actual delivery or transfer of the commodity or scrips : Provided that for the purposes of this clause (a) a contract in respect of raw materials or merchandise entered into by a person in the course of his manufacturing or merchanting business to guard against loss through future price fluctuations in respect of his contracts for actual delivery of goods manufactured by him or merchandi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. The transactions undertaken by the assessee fall within the definition of speculative transactions as defined under section 43(5) of the Act. Therefore, the Revenue was justified in treating the loss suffered by the assessee as a loss suffered in speculation business. The contention advanced on behalf of the assessee that Explanation to section 73 is not applicable need not be considered as the said Explanation has not been invoked by the Revenue authorities. We are, therefore, ignoring the contentions advanced by the learned counsel for the assessee and the counter-contentions advanced on behalf of the Revenue in regard to applicability of Explanation to section 73 of the Act. The brokerage paid by the assessee in regard to the speculative transactions has also not been allowed as a deduction against other income as the same is undisputedly connected with the business of the assessee in the purchase and sale of shares which is treated as a speculation business. We have given our careful consideration to the rival submissions. In our considered view, the commission paid by the assessee in respect of the letting out of the house property is not permissible as a deduction under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t from raising an additional issue, contrary to ratio of the Supreme Court in National Thermal v. CIT (supra) when all evidence for adjudicating the same was placed before it ? (ii) Whether in facts and circumstances of the case the provisions of section 73 could be invoked against the assessee when the assessee was squarely covered by Explanation of section 73 vide which the sale and purchase of shares by a company would not be speculative in nature in case its income was mainly derived from house property or capital gains or income of like nature ? (iii) Whether in facts and circumstances of the case the Hon'ble Tribunal was right in law in holding that the brokerage paid was not an admissible expenditure under section 24 of the IT Act even though the rent actually received by the assessee or the tenant was after deducting the brokerage paid ?" 6. We have heard learned counsel for the parties. 7. As regards question (i), we do not find any reason to take a view different from the view taken by the Tribunal. No doubt that an appellate authority can allow a question to be raised for the first time even if such a question was not raised at a lower forum but the discretion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business is from speculative transactions. To that extent the assessee will be deemed to be carrying on speculative business. Exclusion of categories of specified assessees i.e., where income is under the heads of interests on security, house property, capital gains and other sources or where main business is of banking or granting of loans and advances etc. is to exclude the said assessees from consideration from the scope of provisions to limit the scope of adjustment of loss of speculative business against business income, from other business. In respect of excluded categories, there being no income from other business, such categories have been excluded. Explanation 2 to section 28 provides that speculative transaction shall be deemed to be distinct and separate from other business. 10. It will be appropriate to set out relevant provisions for ready reference : "28. Profits and gains of business or profession. The following income shall be chargeable to income-tax under the head 'Profits and gains of business or profession', Explanation 2. Where speculative transactions carried on by an assessee are of such a nature as to constitute a business, the business (hereinafter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... behalf of the assessee that categories of assessees excluded under the Explanation can be allowed to set off loss in speculative transactions against income from any other source cannot be accepted. As already discussed, even business loss in speculative transactions cannot be set off against other business income or income from other sources, except as may be expressly provided. If that is so, loss from speculative transactions could not stand on higher footing than the business loss so as to qualify for set off against other income. 12. The object of addition of Explanation was to check tax avoidance device resorted to for manipulation by share dealings and thereby avoid tax on business income in the light of recommendations of Wanchoo Committee Report (December, 1971 p. 78) which is as under : "A tax avoidance device often resorted to by business houses controlling groups of companies is manipulation of results from dealings in shares of the companies controlled by them. In our opinion, such manipulation in share dealings for the purpose of tax avoidance can be checked effectively if the results of dealings in shares by such companies are treated for tax purposes in a manne ..... X X X X Extracts X X X X X X X X Extracts X X X X
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