TMI Blog2016 (5) TMI 856X X X X Extracts X X X X X X X X Extracts X X X X ..... he four heads that are referred to therein. Obviously, in computing the gross total income the normal provisions of the Act must be applied and it is only thereafter, that it has to be determined as to whether the gross total income so computed consists mainly of income which is chargeable under the heads referred to in the Explanation. Consequently, in the present case, the gross total income of the assessee was required to be computed, inter alia, by computing the income under the head of profits and gains of business or profession as well. Both the income from service charges and the loss in share trading would have to be taken into account in computing the income under that head, both being sources under the same head. The assessee had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , securities, commodities and derivatives. The Ld. AO observed that the assessee suffered loss of ₹ 35,19,923/- from the business of purchase and sale of shares, futures and derivatives. The Ld. AO also observed that the assessee had earned interest income of ₹ 49,26,724/- from fixed deposits kept with schedule banks which was offered by the assessee for taxation as income from business. The assessee explained before the AO that for the purpose of carrying out the business of the assessee, it has to deposit margin money, collateral security and give guarantees to stock exchange/clearing Member for which the fixed deposits are pledged with Banks. Interest earned on the fixed deposit is accordingly incidental for the purpose of de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .00 Total income: Rs.49,26,724.00 R/O Rs.49,26,720.00 4. On first appeal, the Ld. CIT(A) held that the interest income from the said deposits derived by the assessee was due to placing of margin money with the Stock Exchange so as to enable the assessee to get exposure to trade on the NSE platform in accordance with their risk management policy and so dealing in securities and interest on FDs were integral part of the securities business. Accordingly, he directed the Ld. AO to assess the loss arising from dealing in securities as well as interest income from FDs under profits from speculative business and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s consists of the purchase and sale of such shares. Hence, we find that in any case the provisions of Explanation to Sec. 73 of the Act could not be made applicable in the facts and circumstances. The Ld. AR also placed reliance on the decision of the jurisdictional High Court in the case of ITA No. 196 of 1999, CIT Vs. Middleton Investment Trading dated 15.01.2014, wherein it has been held as under: The Court : The income of the assessee arising from different heads was as follows: I. Loss in the purchase and sale of shares (-) ₹ 10,83,091/- including interest liability attributable to it. II. Income from the business of granting (+) ₹ 2,10,218/- loans, advances etc. III. Short term capital gains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 341 ITR 556 wherein the following view was taken: The ambit of sub-section (1) of section 73 is only to prohibit the setting off of a loss which has resulted from a speculation business, save and except against the profits and gains of another speculation business. In order to determine whether the exception that is carved out by the Explanation applies, the Legislature has first mandated a computation of the gross total income of the company. The words consists mainly are indicative of the fact that the Legislature had in its contemplation that the gross total income consists predominantly of income from the four heads that are referred to therein. Obviously, in computing the gross total income the normal provisions of the Act mus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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