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TMI Blog2015 (6) TMI 449X X X X Extracts X X X X X X X X Extracts X X X X ..... ming the stand of the AO in treating loss on sale of shares of Rs. 15,50,000/- as speculative loss applying the provisions of Explanation to Section 73(1) of the Income Tax Act, 1961 without proper consideration and appreciation of the facts of the case as well as relevant provisions of the Act. 2. The learned CIT(A) has erred in not considering/appreciating the fact that the appellant company is an NBFC, which is specially excluded from the purview of Explanation to Section 73 of the Act. Therefore, the impugned loss of Rs. 15,50,000/- requires to be set-off against profit from business/other sources/capital gain. 3. The learned CIT(A) has further erred in not considering the various decisions relied upon by the appellant including the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee is engaged in the business of non-banking finance company for advancing loans, etc. He submitted that the ld.CIT(A) grossly erred in applying the provisions of Explanation to Section 73(1) of the Act. 3.1. On the contrary, ld.Sr.DR supported the orders of the authorities below. 4. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. The contention of the ld.counsel for the assessee is that the ld.CIT(A) erred in applying the provisions of Explanation to Section 73(1) of the Act. For the sake of clarity, Explanation to Section 73 of the Act is reproduced hereunder:- SECTION 73 : Losses in speculation business. (1) Any loss, computed in respect of a specul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from other sources"], or a company [the principal business of which is the business of trading in shares or banking] 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. 4.1. From a bare reading of the above Explanation, it is evident that a company whose gross total income consists mainly of income which is chargeable under the heads "Interest on securities", "Income from house property, "Capital gains" and "Income from other sources", or a company the principal business of which is the business of ban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the purchase and sale of shares of other companies, such amount shall, for the purpose of this section, be deemed to be carrying on a speculative business to the extent to which the business consists of purchase and sale of such shares." A careful perusal of the above explanation reveals that the It is applicable to two categories of companies. In first category, an exception has been provided to the companies whose gross total income consists mainly of income under the head Interest on securities, interest from house property, capital gain and income from other sources. In second category, the companies which are in the business of banking or granting of loans and advances have been included for the purpose of deeming to be carrying o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be adjusted against future speculation profit only. The ld.CIT(A) confirmed the action of the Assessing Officer. The grievance of the assessee is that both the authorities below have wrongly interpreted the Explanation to section 73 of the Act. It is undisputed fact that the principal business of the assessee-company is granting of loans and advances and the substantial income has been derived therefrom. The R.B.I. has granted to the assessee Certificate of Registration u/s.45-IA of the Reserve Bank of India Act, 1934 to commence/carry on the business of non-banking financial institution subject to certain conditions. Under these facts, the authorities below have erred and are not justified in applying the provisions of Explanation to Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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