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2015 (12) TMI 349 - ITAT JAIPUR

2015 (12) TMI 349 - ITAT JAIPUR - TMI - Set off of loss in purchase and sale of shares against business income - CIT(A) allowed the set off of speculative loss disallowed by the AO u/s 73 (1)- Held that:- We find from the records that 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 is also held by Hon'ble Gujarat High Court in the case of Barkha Investment & Tradi .....

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explanation to Section 73 is not applicable as held in the case of Narain Properties Ltd. vs. ACIT (2013 (4) TMI 189 - ALLAHABAD HIGH COURT ) and ACIT vs. Tanna Electro Mechanics (P) Ltd. (2005 (10) TMI 425 - ITAT MUMBAI ). Thus the AO was not justified in treating the loss in the purchase and sale of shares as speculation loss. Hence, considering the order of the ld. CIT(A) and our deliberations on the issue, we find no reason to interfere in the order of the ld. CIT(A) which is sustained. - D .....

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g to allow set off of loss in purchase and sale of shares against business income without appreciating the facts 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 rev .....

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dated 6-07-2007 asked for assessee to furnish the details of separate trading account for trading in scrips for physical trading, F&O transactions and day-trading. The AO observed that the assessee has vide letter dated 16-08-2007 furnished scripwise trading statement for delivery based transactions. As per the details submitted by the assessee, it is observed by the AO that the assessee during the year under consideration has sold 50,000 shares of M/s. Polymetch Engineering (P) Ltd. worth .....

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e assessee to furnish the trading account for various segments but the assessee submitted consolidated trading account as well as scrip-wise trading account and thus indicated the loss of ₹ 54,20,000/-in the purchase and sale of shares. The AO invoked the provisions of explanation to Section 73 of the Act considering the reply as to the transactions made in the scrips sales and purchases as the reply filed by the assessee was not found acceptable by the AO. The AO relied on following case .....

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₹ 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 of ₹ 54,20,000/- disallowed by the AO u/s 73 (1) of the Act by observing as under:- 3.1 I have duly considered the submissions of the appellant….. 3.2 The AO had place reliance on the decision of CIT vs. Intermetal Trade Ltd. (258 ITR 536) but the facts were distinguishable. In the cited case, the main business was that of trading I metals a .....

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nting loans and advances. Further Explanation to Section 73 being the deeming provision, should be construed strictly. In the case of Aryasthan Corporation Ltd. vs. CIT (253 ITR 401- Calcutta), relied upon by the AO, the issue involved was to decide whether the assessee company was an investment company u/s 109(ii) of the Act or not. The facts of the case were different hence it was not applicable. In the case of CIT vs. Amritlal & Co. (212 ITR 540 - Bombay) relied upon by the AO, the issue .....

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on 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 Barkha Investment & Trading Company vs. CIT (281 ITR 316) that once the company was regist .....

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