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TMI Blog2015 (12) TMI 349X X X X Extracts X X X X X X X X Extracts X X X X ..... acts that the loss suffered by the assessee in share business was in the nature of speculation business by the deeming fiction contained in Explanation to Section 73 and therefore, set off of speculation loss was not admissible against business income.'' 2.1 Brief facts of this case are that that the assessee filed its return of income on 29-10-2005 declaring nil income. The assessee had revised its return of income on 27-01-2006. Thereafter the case of the assessee was scrutinized u/s 143(3) of the Act. The AO observed that the assessee in this case is engaged in the business of financial services like investment and dealing in shares. The assessee in the profit and loss account for the year ended on 31-03-205 had shown purchase and sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chases as the reply filed by the assessee was not found acceptable by the AO. The AO relied on following case laws in support of application of provisions of Section 73 of the Act in the assessment order. (i) Aryasthan Corporation Ltd. vs. CIT, 253 ITR 401 (Cal.) (ii) CIT vs. Amritlal & Co. 212 ITR 540(Bom.) (iii) Eastern Aviation & Industries Ltd. vs. CIT, 208 ITR 1023 (Cal.) (iv) CIT vs. Park View Properties (P) Ltd. , 261 ITR 473 (v) CIT vs. Intermetal Trade Ltd., 285 ITR 536 (M.P.) In view of the above facts and circumstances of the case, the AO disallowed the set off of speculative loss of Rs. 54,20,000/- u/s 73(1) of the Act. 2.2 The assessee carried the matter before the ld. CIT(A) who allowed the set off of speculative loss o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Industries Ltd. vs. CIT, 20 ITR 1023 - Calcutta) relied upon by the AO, the underlying question to be tested in Eastern Aviation & Industries Ltd.'s case was that whether the assessee company was an investment company in terms of Section 109(ii) of the Act or not. In the case of CIT vs. Park View Products (P) Ltd. (261 ITR 473) relied upon by the AO, the issue was whether the main source of income was from other than business income or not. This case was thus not at all relevant in the present case. The AO has not taken into consideration that the assessee company was a non-banking financial company as per the certificate of registration granted by the Reserve Bank of India. It was held by Hon'ble Gujarat High Court in the case of Barkh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... once the assessee company was registered with the Reserve Bank of India and kept the registration alive as Non-Banking Financial Company, the assessee company was to be considered as a company, the principal business of which was granting of loans and advances and Chapter III-B of RBI Act will have an over riding effect. It is observed that if the assessee company has principal business of granting loans and advances then explanation to Section 73 is not applicable as held in the case of Narain Properties Ltd. vs. ACIT (11 SOT 1, ITAT Lucknow) and ACIT vs. Tanna Electro Mechanics (P) Ltd. (7 SOT 121. Thus the AO was not justified in treating the loss of Rs. 54,20,000/- in the purchase and sale of shares as speculation loss. Hence, consideri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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