TMI Blog2015 (5) TMI 887X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness in terms of Explanation to section 73, and is to be treated as such. We, thus, find no infirmity in the treatment of the same as a speculative loss by the Revenue. Decided against assessee. Allocation of the expenditure - Held that:- A reading of the orders by the authorities below, show the A.O. to have made the allocation of the expenditure at para 2.2 of his order, so that the basis of the allocation of the commission expenditure by the A.O. has been clarified. No infirmity therein, which found confirmation with the ld. CIT(A), was brought to our notice during hearing, so that we have no reason to disturb the same. We decide accordingly. We may also clarify that in finally computing the loss on speculation business, the A.O. has also considered the said expenses as well as the dividend relatable to the speculation business, and which aspects have not been impugned by the assessee. We decide accordingly. - Decided against assesse. Assessment of the rental income as 'income from other sources' - Held that:-This matter stands covered against the assessee by the order by the tribunal in the assessee's own case for the immediately preceding year, i.e., A.Y. 2003- 04, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng or the granting of loans and advances) consists in the purchase and sale of shares of other companies, such company shall, for the purposes 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.' Under the Explanation, where any part of the business of a company, other than an investment company, or a banking or finance company, consists in the purchase and sale of shares, such company shall, for the purposes of this section, be deemed to be carrying on a speculation business to the extent to which the business consists of purchase and sale of shares. A speculation business is always deemed to be distinct and separate from any other business (Explanation 2 to s. 28). It is by now well settled that the words 'mainly' in the Explanation are to be construed in a mathematical sense. Accordingly, a ratio of 50%, one way or the other, would decide the issue as to the applicability or otherwise of the provision of section 73. Up till here, there is in fact no dispute. The question, however, that arises is as to how the said ratio is to be reckoned where one or more of the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the computation of income under different heads of income. The only manner therefore in which the GTI is to reckoned is by disregarding the loss on the purchase and sale of shares, i.e., excluding the same. Why, if loss on the said activity is to taken in to account, i.e., for the purpose of computing the GTI, the corollary thereof would its adjustment u/s. 72, which is precisely what section 73 seeks to regulate, i.e., in respect of loss arising on the purchase and sale of shares by a closely held company, as in the instant case. If the loss is, or stands to be, adjusted, the same, or the negative figure, does not survive, defeating in effect the purpose of the provision. The whole purpose of the provision is to determine as to whether the loss arising from the business of purchase and sale of shares (of the specified company) is to be regarded as normal business loss or of a speculative business, so that it would be available for set off only against profit, if any, of another speculative business and, further, to the extent unabsorbed thus, carry forward for such set off for a restricted period of four years as against the normative time period of seven years. The only i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... haracter, by determining the applicability or otherwise of the provision of sec.73, is being ascertained. The legislative intent behind a provision, it is well settled, is to be the foundational basis for any interpretative exercise [refer: Padmasundara Rao (Decd.) and Others vs. State of Tamil Nadu and Others [2002] 255 ITR 147 (SC); CIT vs. Baby Marine Exports [2007] 290 ITR 323 (SC)], and has guided our said interpretation. 3.3 In the admitted facts of the case, the assessee has income from advisory charges and brokerage at ₹ 121.81 lacs and ₹ 14.93 lacs respectively. Its other incomes are rent; dividend; and capital gains (long-term), at ₹ 6.39 lacs, ₹ 3.41 lacs and ₹ 19.68 lacs respectively. Quite plainly, the assessee's GTI, whichever way one may reckon it, cannot be considered as consisting mainly of the incomes under the heads specified under Explanation to section 73, viz. 'income from house property', 'capital gains' and 'income from other sources'. Even though we do not subscribe thereto, and is also not consistent with the forgoing discussion, the difference is so huge and apparent, that even the set off of lo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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