TMI Blog2012 (6) TMI 715X X X X Extracts X X X X X X X X Extracts X X X X ..... her sources". In present case, in the relevant year, the income from other sources was the only chargeable income, as the respondent had suffered a business loss otherwise, hence, assessee fell within the purview of the exception carved out in the explanation to Section 73 and that consequently the assessee would not be deemed to be carrying on a speculation business for the purpose of Sec. 73(1) - Decided in favor of assessee. - Income Tax Appeal No. 657 OF 2007 - - - Dated:- 12-6-2012 - S J Vazifdar And M S Sanklecha, JJ. For Appellant : Mr. Vimal Gupta For Respondent :Mr. Jehangir Mistry, Sr Counsel with Mr B G Yewale and M/s. Rajesh Shah Co. JUDGEMENT 1. This is an appeal under section 260-A of the Income Tax Act aga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,12,651/-. On 12.3.1998, the respondent filed a revised return declaring a total loss of Rs.1,24,92,940/-. In the revised return, the assessee showed loss of Rs.1,65,29,711/- arising out of the purchase and loss of shares. The AO by an assessment order dated 29.3.2000 under section 143(3) inter-alia recorded as under :- "The assessee's gross total income as per the second revised return was loss of Rs.1,65,29,711/-. The composition of the same is as under :- Business Profit (-) : Rs.1,72,31,711/- Income from other sources : Rs. 7,02,000/- (-) Rs.1,65,29,711/-" 5. The assessee filed an appeal against the assessment order. Ground XI (4) (b) of the memo of appeal reads as under :- "4. He failed to appreciate and oug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espect of a company whose gross total income consists mainly of income which is chargeable under the heads of "interest on securities", "income from housing property", "capital gains" and "income from other sources". We have set out the relevant part of the assessment order which indicates that in the relevant year, the income from other sources was the only chargeable income, as the respondent had suffered a business loss otherwise. In that view of the matter, the judgment of the Division Bench of this Court in the case of The Commissioner of Income Tax-3 versus. M/s. Darshah Securities Pvt. Ltd. supports the respondent's case. In that case, during the relevant assessment year, the assessee had a loss of about Rs.2.33 crores in the share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be allowed to be set off against the income from any other source under the head of profits and gains of business or profession. 8. In our view, the submission which has been urged on behalf of the Revenue cannot be accepted. 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 prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order of application. That would be impermissible, nor, is it contemplated by Parliament. For, the ambit of Sub Section (1) of Section 73 is only to prohibit the setting off of a loss which has resulted from a speculation 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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