TMI Blog2010 (4) TMI 1084X X X X Extracts X X X X X X X X Extracts X X X X ..... visions of Explanation to 73 of the Act. The assessee has claimed profit on sale of investment amounting to ₹ 54,91,643/-. This comprise of two components viz, short term capital gains of ₹ 15,34,523/- and long term capital gains of ₹ 29,26,296/- computing the gain after providing the indexation. The AO noted that the assessee company does not fall under either of the two categories which are exception to explanation to Section 73 of the IT Act. i.e. (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 . (b) A company the principal business of which is the business of banking or granting of loans and advances. It was further noted that the company regularly makes investment in various scripts listed in the stock exchange with a motive to earn profit. It was hence held that as a result of the transactions of purchase and sale of scripts, the assessee company had earned speculation profit. This was eligible to be adjusted against speculative loss. After set off of the speculative losses, the resultant net speculat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... constitutes a business. This is provided under Explanation 2 to section 28 of the Act. Likewise the definition of the term speculative transactions is provided in section 43(5) in a substantive manner. Generally speaking, the ambit and scope of speculative transaction and speculation loss need to be confined within the limit provided by law contained in the above mentioned previsions. But, further to take care of any device that may be attempted by business houses controlling group of companies for the purpose of reducing the tax incidence, the law has annexed an Explanation to section 73 of the IT Act, 1961. The said Explanation is a deeming provision whereby the transaction of a company dealing in purchase and sale of shares shall be treated as speculative transaction subject to two exceptions. 9.2.2 The ITAT Mumbai Bench in HSBC Securities Capital Markets Pvt. Ltd. v. JCIT (ITA No.3386/Mum/2001 AY 1997-98) referred to the decisions in Aman Portfolio Pvt. Ltd. v. DCIT 92 ITD 324, Concord Commercial (supra). It further referred to the CBDT circular and observed that the circular issued by the CBDT has explained the provisions of Explanation which assumes significance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich is the statement of computation for working of long term capital gains during the year in which the assessee earned long term capital gains of ₹ 29,26,296/-. The learned Counsel for the assessee submitted that identical issue is decided by ITAT Ahmedabad Bench in the case of Kruti Marketing Ltd. Vs ACIT in ITA No.5248/Ahd/1995 dated 31-5-2001. Copy of the order is placed on record. The learned Counsel for the assessee also relied upon the decision of the Hon ble Gujarat High Court in the case of CIT Vs Rewashanker A. Kothari 283 ITR 338 (Guj). 8. We have considered the rival submissions and the material available on record. As per Explanation 2 to section 28 of the IT Act, the law for that matter, treats speculative transaction carried on by an assessee as a distinct and separate business if the nature of such transaction is such that it constitutes a business. ITAT Ahmedabad Bench in the case of Kruti Marketing Ltd. (supra) considering the same question held that A perusal of section 73 read with aforesaid Explanation clearly indicates that in order to bring a transaction within the net of section 73, there should necessarily be a business of speculative transacti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve been given to show that there is a profit of ₹ 29,26,296/-. The details of year of investment are also filed along with the amount invested, indexed cost and year of sale. There is a long difference between the year of investment and the year of sale. The above facts would prove that the assessee made investment and claimed profit on sale of investment amounting to ₹ 54,91,643/- which comprise of long term capital gain and short term capital gain. The AO also noted in the assessment order the nature of business of the assessee to be environment engineering and consultancy. There was no material or evidence provided on record that the assessee company was carrying on speculation business of dealing in shares of other companies. In the absence of any material on record, the findings of the AO are clearly unjustified, particularly when there was no loss in speculation business. The assessee has shown profit of long term capital gains. Considering the above discussions and in the light of the findings of the learned CIT(A), we do not find any justification to interfere with his order. Accordingly, this ground of appeal of the Revenue is dismissed. 9. Ground No. 2 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A). It was not explained that the details were discussed before the AO would show that no detail was filed at any stage before either of the authorities. On the other hand, the learned Counsel for the assessee relied upon the order of the learned CIT(A) and submitted that in case the detail was not filed before the AO, the matter may be remanded to the file of the AO for reconsideration and the assessee would file the same before the AO. 12. On consideration of the rival submissions we are of the view that the matter requires reconsideration at the level of the AO. The assessee claimed loss on sale of security transactions under the head speculative transactions. The assessee was specifically asked to submit the details thereof. The assessee did not file any details before the AO and even no cogent reply was filed. The AO in the absence of any detailed reply on the issue rejected the claim of the assessee for carrying forward of the speculative loss. The same is the position before the learned CIT(A) because no detail was filed as is noted from the impugned order because the submission of the assessee was that the issue was discussed at the assessment stage. The learned CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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