TMI Blog2009 (7) TMI 1245X X X X Extracts X X X X X X X X Extracts X X X X ..... ases of shares the assessee had debited expenditure such as interest of ₹ 6,39,33,267, legal charges, audit fees and other expenses incidental to the business. The net loss shown was ₹ 15,00,92,345 and it was from this figure that the computation of taxable income was commenced in the return of income as mentioned above. 3. In the course of the assessment proceedings u/s 143(3) of the IT Act, the Assessing Officer took the view, based on the Explanation below sec.73 that the share trading business carried on by the assessee should be deemed to be speculation business to the extent to which the business consisted of the purchase and sale of shares. He therefore proceeded to compute the income or loss of such business and in doing so, recast the results of the share trading business in such a manner that only the opening and closing stock of the shares, the purchases and sales of the shares were taken into account. In this manner, he arrived at the loss from the share trading business at ₹ 9,11,40,511 as follows: Decrease in stock Rs.12,42,59,333 Sales of shares ₹ 7,17,39,712 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... represents the speculation loss and is allowed to be carried forward. 5. It will be appreciated from the above that the Assessing Officer excluded the four items of income brokerage, kasar, interest on tax refund and dividend from the purview of the speculation business and taxed them under the heads business and income from other sources . 6. The assessee filed an appeal before the CIT(A) and questioned the assessment in so far as it related to assessing the dividend, brokerage, kasar and interest on tax refund and to the computation of the speculation loss at ₹ 15,51,84,970. The CIT(A) considered the submissions of the assessee and the authorities cited before him and recorded the following findings: a) The dividend income was received in respect of shares which were held as stock in trade. Therefore it is part of the business income, having been earned in the course of the share trading. b) Kasar, brokerage and dividend income are all inter-linked, undistinguishable and inextricably mixed up and cannot be segregated. c) Since dividend income is part of the business income, it cannot be excluded and separately taxed under the head other sources ; it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer seems to have taken the view that only the purchase and sale of shares has to be considered as business and the other items of receipts or expenditure cannot be considered to be part of the said business. In this, with respect and as pointed out by the CIT(A), he seems to have gone wrong. The Explanation requires us to consider the business of shares as a whole. The business cannot obviously be confined only to the purchase and sale; incidental expenditure and receipts are also to be considered as part of the business. In fact, the Assessing Officer himself has considered the expenditure aggregating to ₹ 6,40,44,409 which includes interest expenditure of ₹ 6,39,33,267 as expenditure incidental to the share business and has arrived at the speculation loss at ₹ 15,51,84,970. Having done so, he cannot possibly say that the dividend and kasar income, which are incidental to the share business, cannot be considered as part of the business income. To do so shows an inconsistent approach. Even legally speaking, while applying the Explanation to sec.73 one is not required to bring in the notion of the head of income under which a particular receipt is to be asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s which by virtue of the deeming provisions of Explanation to sec.73 is treated as speculation business and therefore the dividend has to be viewed as profits of the speculation business, even though assessable under the head income from other sources because of sec.56(2)(i). A similar view has been taken by the Ahmedabad Bench C in the case of JCIT v Vividh Leasing Finance Ltd in ITA No.1892/Ahd/1999 (AY 1994-95), dated 2-8-2005 as also in the case of ACIT v Megh Malhar Finestock (P) Ltd (ITA No.5303/Ahd/1996 ITA No.4599/Ahd/1996, dated 30-7-2002. These orders support the decision of the CIT(A) and the defence put up by the assessee in so as the dividend income and kasar income are concerned. 10. Two orders of the Tribunal cited by the department have to be adverted to. The first is the order of the Mumbai Bench in DCIT v Aakrosh Investment Leasing (P) Ltd (2004) 90 ITD 287. In this order it was held that where shares are held as stock-in-trade (and not as investment) the dividend on the shares would form part of income from the business. It was accordingly held that where the dividend income is taxable as business income and there is no income to be assessed under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he old IT Act of 1922 and the same was followed by the Calcutta High Court (supra) for the assessment year 1964-65 to which the IT Act, 1961 is applicable. No decision of the Ahmedabad Bench of the Tribunal or the Hon ble jurisdictional High Court taking a contrary view was brought to our notice on behalf of the assessee, in so far as brokerage income is concerned. Therefore, respectfully following the order of the Delhi Bench of the Tribunal (supra) cited by the learned CIT-DR, in which the judgments of the Supreme Court and Calcutta High Court have been followed, we hold that the brokerage income of ₹ 1,24,650 was rightly not treated as part of the speculation business. 12. We thus confirm the decision of the CIT(A) in so far as it relates to the dividend and kasar income and reverse the same in so far as it relates to the brokerage income. The first ground of the department is partly allowed. The other two grounds being general, no decision is required. 13. So far as the CO of the assessee is concerned, the first ground is that the CIT(A) did not adjudicate upon the ground that the Assessing Officer erred in not allowing the carried forward losses of earlier years wh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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