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TMI Blog2013 (7) TMI 119X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances of the case, Income Tax Appellate Tribunal, was right in law in confirming the allocation of business expenses amongst the speculation and non-speculation activities, though both were part of the single and indivisible business carried on by the appellant? B. Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified in law and on facts in bifurcating the business expenses amongst three activities in the ratio of their turnover?" 2. Brief facts are necessary for appreciating the questions raised before us:- 2.1 The appellant, a private company, is engaged in the business of trading of shares, gold bullion and commodities. For the assessment year 2007-08 the appellant filed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business income, the allocation of expenses relating to speculative business is necessary to arrive at correct speculative loss. Since the allocation of expenses done by the assessing officer is justified, the assessing officer's action is confirmed." 3. Aggrieved by and dissatisfied with such confirmation, the appellant assessee preferred the appeal before the Tribunal. The Tribunal also concurred with the findings of both the Assessing Officer and CIT(Appeals) relying on the decision of Allahabad High Court rendered in the case of Makhanlal Ram Swarup vs. Commissioner of Income- Tax, Lucknow reported in [1966] 61 ITR 214. 4. The Tribunal relied on the judgment of Allahabad High Court rendered in the case of Makhanlal Ram Swarup vs. Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly conceded, and rightly so before the Incometax Appellate Tribunal, that the apportionment, if it could have been made, was a reasonable one. In this view of the matter, the question is answered in the affirmative by saying that the Income-tax Officer could have apportioned under section 10 of the Act the expenses between the money-lending and speculation business." 5. Tribunal bifurcated the allocation of Rs.13,76,995/- to all the three activities, namely, (1) purchase and sale of shares (2) speculative loans of commodity transactions and (3) income from derivation of shares on the basis of the turnover of these activities. This has aggrieved the appellant and, therefore, the present appeal proposing the aforementioned questions of law. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purposes of the section be deemed to carry on speculation business to the extent to which the business consists of the purchase and sale of such shares. The deeming fiction applies only to a company and the provision makes it clear that the deeming fiction extends only for the purposes of the section. Applying the provisions of section 73(1) to determine whether a company is carrying on speculation business would reverse the order of application. 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 except against the profits and gains of another speculation business. 7. Per contra, learned Senior Counsel Mr. M.R.Bhatt appearing for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penses written off Rs. 8,461/- Total Rs.13,76,995/- 10. It is also not disputed that the expenses are relatable to both speculative and non-speculative transactions and therefore in appropriation to the absolute value of income such expenses have been divided in the ratio of 2:3 between speculative and non-speculative income. Authorities have also noted that the business of the appellant is the purchase and sale of shares which is a speculative business as per the explanation to section 73. 10.1 This provision of the Income Tax Act provides that any loss computed in respect of the speculation business carried on by the assessee shall not be set off except against the profit and gains of another speculation business. Explanation specifi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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