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2016 (3) TMI 631 - ITAT KOLKATA

2016 (3) TMI 631 - ITAT KOLKATA - TMI - Share trading loss treated as speculation loss - application of provisions of Explanation to Section 73 - Held that:- When the principal business is that of granting loans and advances and if such company also engages itself in purchase and sale of shares, then the purchase and sale of shares activity would fall under the exception to Explanation to Section 73 of the Act. We have already held that one of the main objects of the assessee company is lending .....

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ulation loss and accordingly we find no infirmity in the order of the Learned CIT(A) in this regard. - Decided against revenue - I.T.A No. 842/Kol/2013 - Dated:- 3-2-2016 - Shri N.V. Vasudevan, Judicial Member, and Shri M. Balaganesh, Accountant Member For The Appellant: Shri Arindam Bhattacharya, JCIT/ ld.Sr.DR For The Respondent: Shri D.S. Damle,FCA, ld.AR ORDER SHRI M.BALAGANESH, AM This appeal of the revenue arises out of the order of the Learned CIT(A)-VI, Kolkata in Appeal No. 320/CIT( .....

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t the original assessment was completed in this case u/s 143(3) of the Act on 24.3.2006 assessing the total income at ₹ 91,54,270/- wherein the Learned AO disallowed the share trading loss of ₹ 51,56,183/- , among other additions, as speculation loss as the same was greater than the income disclosed by the assessee under the head other sources by applying the provisions of Explanation to Section 73 of the Act. This action was confirmed by the Learned CIT(A) on first appeal, while gra .....

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ction 73 of the Act. 3.1. The Learned AO passed an order u/s 143(3) read with section 254 of the Act on 30.12.2011 by treating the share trading loss as speculation loss going by the income composition of the assessee and concluding that the objects clause of the assessee do not contain the activity of lending and hence the interest income derived by the assessee on lending and funds deployment in money lending cannot be the determining factor for understanding the principal business of the asse .....

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the assessee is ₹ 635.67 lacs as against funds deployed in share trading activity of ₹ 187.24 lacs during the asst year under appeal. He also observed from the comparable chart of funds deployed in share trading and in lending activity that funds deployed in lending activity is more than that deployed in share trading activity. Accordingly he concluded that the principal business of asessee is granting of loans and advances and hence the assessee falls under the exception clause of .....

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tion of the company and therefore the loss from share trading business is covered by the explanation to section 73. 3. That the Ld. CIT(A) has erred in citing the decisions of the ITA T Kolkata in the case of ITO vs. Baibhav Credit & Portfolio (P) Ltd. and in the case of Valour Constructions Pvt. Ltd. with the observation that the assessee company's principal business is granting loans and advances whereas as per Memorandum of Association of the company, this is not included in the main .....

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ently supported the order of the Learned AO and argued that the Learned CIT(A) erred in granting relief to the assessee based on funds deployment made by the assessee in lending activity and accordingly erred in concluding that Explanation to section 73 of the Act is not applicable to the assessee. In response to this, the Learned AR vehemently supported the order of the Learned CIT(A) and also took us into the relevant operative portions of various judgements on the impugned issue which were re .....

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ss in India or elsewhere and debenture stocks. bonds, obligations and securities issued or guaranteed by any Government State, dominion, sovereign ruler, commissioner, Public body or authority supreme, municipal local or otherwise whether In India or elsewhere and to deal in real estates or properties either out of its own funds or out of funds that the Company might borrow and to vary or otherwise dispose of. exchange, transfer or alienate any of the investments, real estates and properties of .....

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Banking Regulation Act, 1949 . We also find from the paper book filed by the Learned AR that assessee is a Non- Banking Finance Company (NBFC in short) registered with Reserve Bank of India vide registration number B-05.05873 dated 28.11.2003. We find that this certificate would be issued by RBI only when the assessee is engaged in the lending activities. It is also seen from Clause 3 of Memorandum of Association (MOA) that one of the main objects of assessee company is to engage itself in lend .....

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e on record, we find that the plea now taken before us and the statement showing fund deployment by the assessee company has been placed before us for the first time and the same was not before the lower authorities. Since the details now relied onby the assessee needs verification at the end of the AO, we deem it proper to restore the matter to the file of the AO for adjudicating afresh after affording a reasonable opportunity of being heard to the assessee. Therefore, these grounds of cross ob .....

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e provisions of Explanation to section 73 of the Act cannot be applied to the facts of the case. For the sake of convenience, the details of funds deployed by the assessee in each of the years is given below:- Funds deployed in (Rs in lacs) Year Ended Stock in Trade of shares Loans 31.03.2003 187.24 635.67 31.03.2004 234.45 790.04 31.03.2005 200.57 1009.08 31.03.2006 102.16 1378.31 We find that the Learned AO had decided the impugned issue based on the income composition of the assessee and acco .....

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