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TMI Blog2013 (10) TMI 643X X X X Extracts X X X X X X X X Extracts X X X X ..... ny as five grounds, besides an additional ground. At the very outset though it was submitted by the ld. Authorized Representative (AR), the assessee's counsel, that the assessee is not pressing its ground nos. 1 & 2 as well as the additional ground, making an endorsement to that effect in the grounds of appeal on record. Accordingly, ground nos. 1 & 2 and the additional ground as raised by the assessee are dismissed as not pressed. 3.1 Opening the arguments on behalf of the assessee in respect of Ground No.3, it was submitted that the same relates to the disallowance of loss in the impugned sum of Rs.67,51,469/- incurred on jobbing activity. The assessee-company is a share and stock broker, and apart from business undertaken for and on beh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otal expenditure resulting in a disallowance of Rs.182.05 lacs. The same again has no basis in fact/s, and has been done in view of the assessee expressing its inability to furnish the turnover figures, i.e., of purchase and sale with regard to the jobbing activity, and which was for the reason that the stock exchange does not release such figures where the transactions are made by a member on its own account, crediting or charging him only the net amount. The said adjustments have thus resulted in gross injustice, by inflating the assessee's income for the year at Rs.249.57 lacs. 3.2 The ld. Departmental Representative (DR) would, on the other hand, rely on the orders of the authorities below, stating that the business of a member of a st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e relevant provision of the Act. We shall accordingly begin by reproducing the same: 'Definitions of certain terms relevant to income from profits and gains of business or profession. 43. In sections 28 to 41 and in this section, unless the context otherwise requires- (1) ........ (2) ...... (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s clients, in which case the entire profit loss or profit, as the case may be, would be to the client's account, and not his. The reason is simple, as the ownership of the transaction, or the property in the contract, vests in the client, with the assessee as a broker-member being entitled only to the remuneration toward his services in executing the trade, etc. In other words, the law clearly envisages a member entering into transactions as a principal, incurring risk and, consequently, the possibility of loss arising, so that he may have to hedge against the same, as by way of jobbing or arbitrage. As regards the words 'business as such member' occurring in the provision, which form the basis of the Revenue's stand; true, each word of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereinafter provided, the tax shall not be payable by an assessee on so much of the profits or gains derived from any industrial undertaking to which this section applies as do not exceed six per cent. per annum on the capital employed in the undertaking, computed in accordance with such rules as may be made in this behalf by the Central Board of Revenue. (2) This section applies to any industrial undertaking which - (i) is not formed by the splitting up, or the reconstruction, of a business already in existence or by the transfer to a new business of building, machinery or plant previously used in any other business..." [emphasis, by underlining, ours] The words 'business as such member' in clause (c) of sec. 43(5) must therefore neces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exposure on account of transactions/contracts entered into as a principal, i.e., independent of the jobbing transaction, which would be, and for that reason, regarded as non-speculative. That is, that the jobbing activity forms an integral part of his business. This becomes all the more relevant and pertinent in the present case, as apart from being only toward satisfaction of the mandate of the provision, the loss claimed stands incurred in the jobbing activity itself, i.e., which the law excepts where entered into to guard against an imminent or possible loss that a member stands to incur or suffer in the course of his business. That is not to say, we may clarify, that no loss could be incurred on such transactions, which may be so, but ..... X X X X Extracts X X X X X X X X Extracts X X X X
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