GST Helpdesk   Subscription   Demo   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2016 (4) TMI 584 - ITAT KOLKATA

2016 (4) TMI 584 - ITAT KOLKATA - TMI - Treatment to share trading loss - whether treated as deemed speculation loss? - Held that:- We find that the ratio laid down by the Hon’ble Calcutta High Court in the case of RPG Industries Ltd. (2011 (3) TMI 656 - CALCUTTA HIGH COURT ) clearly supports the conclusion of the CIT(A) as laid down s laid down that by Explanation to s. 73, a legal fiction has been created whereby loss suffered by a company in share transactions is to be treated as a speculativ .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

provision of s. 43(5) of the Act defining speculative transaction should prevail even if the case comes within the purview of the Explanation to s. 73 is accepted, effect cannot be given to the Explanation at all and it would be rendered meaningless and that it was the intention of the legislature that if the assessee is a company indicated in the Explanation to s. 73, there shall be a different definition of speculation business than the one applicable to other types of assessees. The Hon’ble C .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nly one interpretation of the Explanation to s. 73 is possible and that goes against the assessee and therefore there is no question of adopting a view which is favourable to the assessee. CIT(A) treating the share trading loss as deemed speculation loss confirmed - Decided against assessee

Genuity of trading loss - Held that:- CIT(A) rightly held that the loss in question had to be regarded as genuine loss. The identity of the companies from where purchase of shares was made by the A .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

revenue - ITA No.657/Kol/2012, ITA No.750/Kol/2012 - Dated:- 2-3-2016 - Shri N.V.Vasudevan, JM and Shri Waseem Ahmed, AM For The Assessee Shri R.P.Agarwal, Sr.Advocate & Shri K.K.Chhaparia, FCA For The Department : Shri Rajat Subhra Biswas, CIT, DR ORDER PER BENCH ITA No.657/Kol/12 is an appeal by the Assessee while ITA No.750/Kol/12 is an appeal by the Revenue. Both these appeals are directed against the order dated 27.02.2012 of CIT(A)-Central-II, Kolkata, relating to AY 2007-08. 2. Groun .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

part of regular accounts in an order passed u/s 153A of Income Tax Act, 1961. The action of the A.O was wholly unreasonable, uncalled for and bad in law. The Ld. CIT (A) was unjustified in confirming the action of AO. 3. For the appellant craves leave to add, alter or withdraw all or any grounds of appeal at the time of hearing. Grounds of appeal raised by the revenue reads as follows :- 1. For that on the facts and circumstances of the case the Ld. CT(A) has erred in granting the benefit to the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ny. It is engaged in the real estate business, manufacturing of sponge iron, logistics, C&F Agency, distributorship etc. For A.Y.2007-08 assessee filed return of income declaring total income of ₹ 10,28,840/-. An intimation u/s 143(1) of the Income Tax Act, 1961 (Act) dated 03.10.2008 was issued. 4. There was a search and seizure operation carried out in the case of the assessee u/s 132 of the Act on 25.04.2008. Thereafter notice u/s 153A was issued. For A.Y.2007- 08. The Assessee file .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ows that in arriving at the net profit in the profit and loss account the assessee included loss of ₹ 1,34,38,700/- on account of trading in shares. Sec.73 of the Act and Explanation to section 73 of the Act reads as follows :- 73. Losses in speculation business (1) Any loss, computed in respect of a speculation business carried on by the assessee, shall not be set off except against profits and. gains, if any, of another speculation business. (2) Where for any assessment year any loss com .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

loss cannot be wholly so set off, the amount of loss not so set off shall be carried forward to the following assessment year and so on. (3) In respect of allowance on account of depreciation or capital expenditure on scientific research, the provisions of sub- section (2) of section 72 shall apply in relation to speculation business as they apply in relation to any other business. (4) No loss shall be carried forward under this section for more than eight assessment years immediately succeeding .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ts in the purchase and sale of shares of other companies, such company shall, for the purposes of this section, be deemed to be carrying on a speculation business to the extent to which the business consists of the purchase and sale of such shares.] 5. According to the AO, the assessee was a company and the loss that the assessee had incurred in trading in shares had to be treated as speculation loss in view of Explanation to Sec.73 of the Act which provides that where any part of the business o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ted. 6. Without prejudice to the above AO also held that the loss in question was not genuine. The findings of the AO in this regard were as follows :- Notwithstanding the fact mentioned above, the documents furnished by the assessee as regards its purchase and sale of shares have also been examined from this end. It is seen that assessee had claimed purchase of 16060 number of shares of Bajaj Hindusthan @ ₹ 524.05 per share on 05.04.2006 as also purchase of 8178 shares of Arvind Mills Ltd .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

through Stock Exchange and those were presumed to be Off- Market purchase. Departmental Inspector was deputed to verify whether those concerns were in existence at all. The report of the Inspector shows no such concerns were there in the given addresses during the relevant period. In order to further verify the genuineness of such transactions bank statements of the assessee for that period was called for. But no such bank statement showing the transactions relating to the purchase of above ment .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

f shares into demat form. In this respect also, the assessee preferred to remain mum and no documents whatsoever was furnished showing de materialization of shares. The ledger copy of Sri Ram Electrocast Pvt. Ltd. in respect of purchases and sales of such shares and the narration given thereon also indicates the differences of the manner of purchase and sale. In the ledger account, no detailed narration is given as to the payment made for claimed purchase of- shares from M/s. Chandimata Manageme .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

as part of the order with Annexure - 1 to 7. The analysis given above clearly reveals that assessee is not eligible for getting such benefit of set-off of loss with the rental income on two grounds - (i) provision as enumerated in Explanation to Section 73 of the L T. Act and (ii) the ingenuinity of transactions which resulted the arranged loss. Accordingly, a sum of Rs.l,34,38,700/- is disallowed as business loss, as claimed by the assessee and no benefit of set-off in this respect is allowed. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

cerned, I am- of the opinion that the loss cannot be treated as ingenuine because all the three parties from whom shares were purchased by the appellant company are assessed to tax and filing their return of income. The A.O. did not allow an opportunity to the appellant company to rebut the findings in enquiry conducted by him that the three companies from whom shares were purchased were not available on the given addresses. The fact remains that these companies are assessed to tax and their PAN .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the Hon ble Calcutta High Court in the case of RPG Industries Ltd. Vs CIT 338 ITR 313(Cal). In the aforesaid decision the Hon ble Calcutta High Court held that when there was actual delivery of shares the loss in question on account of dealing in shares in the case of an assessee which is a company had to be treated as speculation loss. One of the contention raised by the assessee before CIT(A) was that the intention of the legislature in inserting Explanation to section 73 of the Act was unamb .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

n 73 of the Act cannot be invoked. In this regard the assessee placed reliance on the decision of ITAT Delhi Bench in the case of Aman Portfolio Pvt., Ltd. Vs DCIT 92 ITD 324. CIT(A) however was of the view that the said decision has not been approved by the Hon ble Calcutta high Court in the case of RPG Industries Ltd. (supra). For the above reason CIT(A) held that the share trading loss was a speculation loss and cannot be set off against the business income of the assessee. Accordingly the lo .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rd to the jurisdiction of the AO to make the addition in respect of loss in trading in shares treating the speculation loss in the present proceedings u/s 153A of the Act. Such a ground was raised by the assesse before CIT(A) but since no arguments were advanced on the said ground of appeal, the CIT(A) dismissed the said ground. 11. The learned counsel for the assessee first addressed the arguments on ground no.2. His submission was that in the course of search no incriminating documents whatsoe .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

u/s 153A of the Act with regard to the question whether the loss in trading of shares had to be regarded as speculative loss or as normal business loss, could not be made by the AO and his action has to be held as without jurisdiction. In this regard the learned counsel for the assessee placed reliance on the decision of Hon ble Delhi High Court in the case of CIT vs Kabul Chawla 380 ITR 573 (Delhi) wherein the following proposition was laid down with regard to jurisdiction of AO in assessment .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

sessments and reassessments pending on the date of the search shall abate. The total income for such assessment years will have to be computed by the Assessing Officers as a fresh exercise. (iii) The Assessing Officer exercise normal assessment powers in respect of the six years previous to relevant assessment year in which the search takes place. The Assessing officer has the power to assess and reassess the "total income" of the six years in separate assessment orders for each of the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

trary or made without any relevance or nexus with the seized material. Obviously, an assessment has to be made under this section only on the basis of the seized material. (v) In the absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word "assess" in section 153A is relatable to abated proceedings (i.e., those pending on the date of search) and the word "reassess to completed assessment proce .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. Conclusion 38. The present appeals concern AYs, 2002-03, 2005-06 and 2006-07.On the date of the search the said assessments already stood completed. Since no incriminating material was unearthed during the search, no additions could have b .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

o tax of the assessee has escaped assessment . The two decisions referred to in this regard were CIT vs Orient Craft Ltd. 354 ITR 536 (Delhi) and Mohan Gupta (HUF) vs CIT 366 ITR 115 (Delhi). 13. On the aspect that the loss in question should not be treated as speculation loss the learned counsel for the assessee apart from relying on the submissions made before CIT(A), further placed reliance on the decision of Hyderabad ITAT in the case of Godavari Capital Limited vs DCIT (2004) 273 ITR 10 (Hy .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

sued by the AO on …10.2008. The time limit for issue of a notice u/s.143(2) on the above return filed by the Assesssee was 6 months from the end of the financial year in the which the return was filed. That time would expire on 30.9.2009. Admittedly no such notice was issued. However, it must be noticed that on 24.4.2008 a search was conducted u/s.132 of the Act in the business premises of the Assessee and therefore no action whatsoever could be taken by the AO on the return of income fil .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

incriminating material whatsoever found in the course of search with regard to the loss on trading in shares claimed to have been incurred by the Assessee. But in the light of the circumstances set out above, it cannot be said that the intimation u/s.143(1) of the Act is a completed assessment. The intimation u/s.143(1) of the Act should therefore be equated to a pending assessment proceeding which stood abated under the proviso to Sec.158BA of the Act. In respect of such abated proceedings, the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tiation of reassessment proceedings u/s.147 of the Act when an intimation u/s.143(1) of the Act is issued and reassessment proceedings are sought to be initiated. The Hon ble Delhi High Court held that even in such cases reasons to believe that income chargeable to tax escaped assessment should exist to assume jurisdiction u/s.147 of the Act. The ratio laid down in the said judgments cannot be extended to equate an assessment u/s.143(1) of the Act to a completed assessment u/s.143(3) of the Act, .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

erned, we find that the ratio laid down by the Hon ble Calcutta High Court in the case of RPG Industries Ltd. (supra) clearly supports the conclusion of the CIT(A). The Hon ble Calcutta High Court in the aforesaid decision has laid down that by Explanation to s. 73, a legal fiction has been created whereby loss suffered by a company in share transactions is to be treated as a speculative loss within the meaning of s. 73, notwithstanding the fact that there was actual delivery of scrips of shares .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of the Explanation to s. 73 is accepted, effect cannot be given to the Explanation at all and it would be rendered meaningless and that it was the intention of the legislature that if the assessee is a company indicated in the Explanation to s. 73, there shall be a different definition of speculation business than the one applicable to other types of assessees. The Hon ble Court further held that there is nothing illegal for the legislature to enact two different definitions of speculation busin .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version