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Paradise Merchants Pvt. Ltd. Versus ITO, Wad 14 (1) , New Delhi

Disallowance of speculative loss invoking the provisions of section 73 - Held that:- In case of a company whose gross total income consists mainly of income from interest on securities, income from house property, capital gains and income from other sources, the loss from purchase and sale of shares of other companies, shall not be deemed to be carrying on a speculation business. In other words if the gross total income of the assessee comprises of any or all the heads of income, then the assess .....

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nation to section 73 of the act and consequently the assessee shall not be deemed to be carrying on with the speculative business for the purposes of section 73 (1) of the act. - Decided in favour of assessee - I.T.A. No. 4993/Del/2014 - Dated:- 29-4-2016 - Shri N. K. Saini, Accountant Member And Smt. Beena Pillai, Judicial Member For the Appellant : Shri Ved Jain, CA For the Respondent : Shri Subhakant Sonu, Sr. DR ORDER Per Beena Pillai, JM The present appeal has been filed by the assessee aga .....

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ing the same to be speculative loss by invoking the provisions of section 73 of the Act. (ii) That the said addition has been confirmed by arbitrarily rejecting the explanation of the assessee that the gross total income of the assessee consist mainly of income chargeable under the head 'Capital Gain' and 'Income from other sources' and hence the Explanation to section 73 is not applicable to the assessee company. 3. Without prejudice to the above and in the alternative the learn .....

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nsidered to be speculative loss in view of the proviso (d) to section 43(5) of the Act as inserted by the Finance Act, 2005. 5. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in ignoring the fact that a sum of ₹ 3,07,906/- out of the total loss of ₹ 35,76,559/- is on account of the valuation of the shares as on the closing date of the year. 6(i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts an .....

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on and its total revenue as per profit and loss account comprises of income from sale/purchase of shares, dividends earned and interest income. During the year under consideration the assessee filed its return of income on 29/09/2009 declaring a total business loss of ₹ 79,94,913. The assessee has also paid taxes under section 115 JE on the book profits. The case was selected for scrutiny assessment and statutory notices under section 143 (2) was issued to the assessee. The assessee accord .....

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purchase of the shares, assessee cannot claim the loss in view of explanation to section 73 (1) of the act and accordingly disallowed the loss of Rs.(-)85,76,559.04 claimed by the assessee treating the same as speculation business. The ld.AO also made addition under section 14 A of the act. 3. Aggrieved by the order of the Ld. AO assessee preferred an appeal before the Ld.CIT (A). 4. The ld. CIT(A) confirmed the additions were made by the Ld. Assessing Officer 5. Aggrieved by the order of the l .....

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oked to the facts and circumstances of the case before us. He submitted that this explanation would be applicable to a company other than a company whose gross total income mainly comprises of income from house property, capital gains or income from other sources. 5.3 Ld. A. R. submitted that the loss accrued by the assessee in purchase/sale of shares, is not to be considered while computing the gross total income of the assessee. He further submitted that the manner in which gross total income .....

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below, the arguments advanced by both the parties and judgments relied upon by the Ld. A. R. The only issue that needs to be adjudicated, is in respect of treating the loss on account of sale/purchase of shares are speculated loss under provision to section 73 of the act. 6.1 It is observed that the assessee has calculated the total revenue as per the profit and loss account in the following manner: Particulars Amount (Rs.) Income from sale/purchase of shares (-) 35,76,559.04 Dividend ₹ 5 .....

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ads interest on securities , income from house property , capital gains and income from other sources ], or a company [the principal business of which is the business of banking] or the granting of loans and advances) consists 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 shares.] 6.3 On a plain reading of the a .....

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