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TMI Blog2012 (2) TMI 117X X X X Extracts X X X X X X X X Extracts X X X X ..... in the following terms. " In our view, this a fit case for the High Court to decide the matter on the question of law which basically also requires interpretation of Explanation to Section 73 of the Income Tax Act, 1961. The High Court has dismissed the appeal filed by the Department only on the ground of delay. No doubt, there was a delay. However, looking to the importance of the question of law involved in this matter and looking to the stakes involved, we are of the view that the High Court should consider the matter for admission and thereafter decide the matter on merits in accordance with law. The Civil appeal stands, accordingly allowed." 2. The appeal by the Revenue raises the following substantial question of law: "Whether on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anation to Section 73, the income from service charges had to be adjusted against the loss in share trading. This contention of the assessee has found acceptance by the Commissioner (Appeals) and the Tribunal. The provision of the explanation to Section 73 falls for determination in the Appeal. 5. Under Section 28, income which is chargeable to income tax under the head of profits and gains of business or profession includes the profits and gains of any business or profession, which was carried on by the assessee at any time during the previous year. Explanation (2) to Section 28 provides that where speculative transactions carried on by an assessee are of such a nature as to constitute a business, the business shall be deemed to be distin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 73 provides as follows : " Where any part of the business of a company ([other than 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" and "Income from other sources"], or a company principal business of which is the business of banking or the granting of loans and advances) consists in the purchase and sale of shares of other companies, such company shall, for the purpose of this section, be deemed to be carrying on a speculation business to the extent to which the business consists of the purchase and sale of such shares." 6. The explanation to Section 73 introduces a deeming fiction. The deeming fiction stipula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pted. Leaving aside for a moment, the exception, which is carved out by the explanation to Section 73, the explanation creates a deeming fiction by which a company is deemed to be carrying on a speculation business where any part of its business consists in the purchase and sale of shares of other companies. Now, the exception which is carved out applies to a situation where the gross total income of a company consists mainly of income which is chargeable under the heads "Interest on securities", "Income from house property", "Capital gains" and "Income from other sources". Now, ordinarily income which arises from one source which falls under the head of profits and gains of business or profession can be set off against the loss which arise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business, save and accept against the profits and gains of another speculation business. In order to determine whether the exception that is carved out by the explanation applies, the legislature has first mandated a computation of the gross total income of the Company. The words "consists mainly" are indicative of the fact that the legislature had in its contemplation that the gross total income consists predominantly of income from the four heads that are referred to therein. Obviously, in computing the gross total income the normal provisions of the Act must be applied and it is only thereafter, that it has to be determined as to whether the gross total income so computed consists mainly of income which is chargeable under the heads ref ..... X X X X Extracts X X X X X X X X Extracts X X X X
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