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2015 (5) TMI 887 - ITAT MUMBAI

2015 (5) TMI 887 - ITAT MUMBAI - TMI - Treatment of the loss on share trading - the specified income under Explanation to section 73 Held that:- 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 m .....

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ssessee's principal source of income would be business income. Accordingly, the said loss is a loss from a speculation business 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 h .....

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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, with the ld. CIT(A). - Decided against assesse. - ITA No. 7480/Mum/2010 - Dated:- 8-4-2015 - Joginder Singh, JM And Sanjay Arora, AM,JJ. For the Petitioner : Shri Pra .....

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s, while Gd. # 1 is general in nature, warranting no adjudication, the only issue raised in the instant appeal, i.e., per the effective grounds #2 & #3, is the validity or otherwise in law of the treatment of the loss on share trading, the specified income under Explanation to section 73 of the Act, with assessee also challenging the quantum of the loss so assessed. The primary figures are not disputed, being in fact furnished by the assessee itself, or otherwise borne out of its records. Th .....

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the said income in the main, which is the criteria for the application of section 73 read with Explanation thereto, i.e., in the case of companies covered by it, being specified therein. 3. We have heard the parties, and perused the material on record. 3.1 It shall be relevant to reproduce the provision in its relevant parts: 'Explanation.-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 .....

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rchase 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 (Explanat .....

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reference to which, therefore, the applicability of the said Explanation and, thus, the provision itself, is to be determined, is in the negative, signifying a loss under the relevant head/s of income or of the specified income/s. The assessee's contention is that the negative income being decidedly less than a positive one, it cannot by any means be considered as a positive equivalent to the negative figure, and the ratio (of the different specified incomes in the gross total income), worke .....

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r VI-A. The same, therefore, would not be relevant. Further, if the GTI is to be reckoned in terms of section 80B(5), i.e., upon aggregating different incomes, and prior to allowing any deduction under Chapter VI-A, it would only imply aggregation of incomes in terms of Chapter VI. Section 73 falls under Chapter VI, which provides the rules of aggregation of various income, i.e., falling under different heads of income. The prescription of Chapter VI A, or of section 80B (5), thus, cannot guide .....

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f section 73. To what effect therefore the negativity of the income per se? The GTI, for the purpose of section 73, must therefore be computed by giving effect to provisions up to Chapter V, and indeed of Chapter VI, i.e., in-so-far as they do not impinge upon the working of section 73. Why, the Explanation thereto itself speaks 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 s .....

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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 .....

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against any head of income, leading, however, to different consequences in terms and in view of Explanation to section 73. The mathematical prescription of the said Explanation would therefore suggest that the loss computed for any source of income falling under any head of income would stand to be reckoned in the computation of gross total income only where and to the extent it yields a positive income for or under the relevant head of income. Gross total income, thus, for the purpose of deter .....

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of income, comprising it. A set off of income falling under one head against income from another would dilute the income from the latter, compromising thus the integrity of the composition of the total income in-as-much as the income of the latter head of the income gets reduced (to that extent). Again, for the same reason, the income from the business/s of purchase and sale of shares is to be segregated, i.e., where its net result is a loss, and shall not enter the comparison or the evaluation .....

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f 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 lac .....

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nd is also not consistent with the forgoing discussion, the difference is so huge and apparent, that even the set off of loss on trading in shares, again a business income, incurred at ₹ 44.16 lacs, would not alter this position and the assessee's principal source of income would be business income. Accordingly, the said loss is a loss from a speculation business in terms of Explanation to section 73, and is to be treated as such. We, thus, find no infirmity in the treatment of the sam .....

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