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2016 (5) TMI 856 - ITAT KOLKATA

2016 (5) TMI 856 - ITAT KOLKATA - TMI - Applicability of explanation to Sec. 73 - Held that:- 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 word .....

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onsequently, 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 a dividend income (income from other sources). The Tribunal was justified, in coming to th .....

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r. DR For the Respondent : Shri Sunil Surana, AR ORDER Per Shri M. Balaganesh, AM This appeal by revenue and Cross Objections by assessee are arising out of order of CIT(A)-I, Kolkata vide Appeal No. 428/CC-XI/CIT(A) C-1/12-13 dated 30.08.2013. Assessment was framed by DCIT, Central Circle-XI, Kolkata u/s. 143(1) of the Income tax Act, 1961 (hereinafter referred to as the Act ) for AY 2010-11 vide his order dated 19.12.2012. Since both the appeal and the cross objection are arising out of the sa .....

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ess 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 .....

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Less: Dividend exempt u/s. 10(34) 4,39,029.00 Interest income 49,26,724.00 Amalgamation expenses 46,816.00 Depreciation as Income Tax 2,28,084.00 Rs.56,40,653.00 (-) ₹ 48,94,819.00 Add: Depreciation as per Company Act 3,11,751.00 Amount inadmissible u/s. 14A 90,341.00 Inadmissible Expenses u/s. 37(1) 43,416.00 Rs.4,45,508.00 Speculative business loss to be carried forward (-) ₹ 44,49,311.00 INCOME FROM OTHER SOURCES Interest income Rs.49,26,724.00 Total income: Rs.49,26,724.00 R/O Rs .....

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as interest income from FDs under profits from speculative business and allowed the appeal of assessee. Aggrieved, revenue is in appeal before us. 5. The assessee has also raised Cross Objection in respect of this issue as below: 2. For that the Ld. CIT(A) was perfectly justified in holding the view that explanation to section 73 was not applicable. Even otherwise the said explanation was not applicable, since as the income from other sources was more than the income under the head business as .....

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(other than 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", or a company 13[the principal business of which is the business of trading in shares or 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 .....

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er: 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 in sale of shares (+) ₹ 6.425 (as per computation filed). IV. Income from other sources (as per (+) ₹ 10,13,798/- computation filed) The assessee was interested in conte .....

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n to Section 73." The learned Tribunal held as follows: " ... the net loss under the head "profits and gains of business or profession" would be ₹ 8,72,972/- whereas, the income shown by the assessee under the head "income from other sources" is to the tune of ₹ 10,13,798/-. We are, therefore, of the opinion that the assessee's gross total income consisted mainly of income assessable under the head "income from other sources". It therefore, .....

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oss 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 h .....

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