TMI Blog2016 (9) TMI 214X X X X Extracts X X X X X X X X Extracts X X X X ..... n out of the unappropriated share capital to a particular person. We are of the view that whichever rule of interpretation is followed, whether literal or object wise or purposive, the transactions of the assessee cannot imaginably be deemed to be a speculative business. Therefore the first question is answered in favour of assessee and against the revenue. When we have come to the conclusion that the allotment of shares cannot be termed as purchase, then the assessee cannot be said to be carrying on a speculation business to the extent to which the business consists of the purchase and sale of such shares. Thus it shall not be covered under Explanation to Section 73 and therefore the second question is also answered in favour of assessee. - TAX APPEAL No. 957 of 2006, TAX APPEAL No. 1644 of 2008 - - - Dated:- 2-8-2016 - KS JHAVERI AND G.R.UDHWANI , JJ. MR MANISH J SHAH, ADVOCATE FOR THE APPELLANT MRS MAUNA M BHATT, ADVOCATE FOR THE OPPONENT JUDGMENT ( PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1. Being aggrieved and dissatisfied with the impugned judgment and order dated 24.03.2006 passed by the Income Tax Appellate Tribunal, Ahmedabad Bench (hereinafter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T, the ITAT deleted the penalty by observing that the very fact that matter had been referred to Special Bench by itself indicated that the issue was debatable and therefore could not be a case of concealment. 2.2 Being aggrieved and dissatisfied with the impugned judgment and order passed by the ITAT, the assessee as well as revenue have preferred the present Tax Appeals for consideration of the aforesaid substantial question of law. 3. Mr. J.P. Shah, learned Counsel appearing with Mr. Manish Shah, learned advocate on behalf of the assessee has submitted that the Tribunal erred in holding that getting the shares by allotment on application in Public Issues of Public Limited Companies and eventually selling them is speculation business covered by Explanation to Section 73 of the Act. He has relied upon the decision of the Apex Court in the case of Shri Gopal Jalan and Co. vs. Calcutta Stock Exchange Association Ltd. reported in AIR 1964 SC 250 which quotes with approval Lord Greene M.R. In V.G.M. Holdings Ltd. 1942-1 Ch 235; it seems to me that the word purchase cannot with propriety be applied to the legal transaction under which a person, by the machinery of application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the head business activity and therefore the Tribunal has rightly considered to the same to be speculative loss. 4.1 Mr. Bhatt has relied upon a decision of the Calcutta High Court in the case of Commissioner of Income Tax vs. Arvind Investments Ltd. reported in [1991] 192 ITR 365 wherein the Court held therein that the Explanation to Section 73 applied to the case of the assessee therein whose entire business consisted of dealing in shares and that the loss incurred by the assessee was a speculation loss. He submitted that in the present case also the main business of the assessee was purchasing shares and therefore this decision squarely applies on the facts of the present case. 4.2 Mr. Bhatt, during the course of his arguments has taken this court to the various observations made by the Tribunal in its impugned order which are reproduced hereunder: 7.2 This statement is not specific to any particular provision but to the Amendment Act as a whole and talks about many objectives one of which is to fight and curb tax evasion. Nothing is specifically mentioned about the alleged avowed object with regard to the impugned Explanation. Clause 16 of the Noted on clauses (pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on is dealing with. It cannot control the interpretation of the words of a section, particularly when the language of the section is clear and unambiguous but, being part of the statute it prima facie furnishes some clue as to the meaning and purpose of the section. It is further observed that the speeches made by the Members of the Legislature on the floor of the House when a Bill for enacting a statutory provision is being debated are inadmissible for the purpose of interpreting the statutory provision but the speech made by the mover of the Bill explaining the reason, for the introduction of the bill can certainly be referred to for the purpose of ascertaining the mischief sought to be remedied by the legislation and the object and purpose for which the legislation was enacted. In Anandji Haridas Co. (P.) Ltd. 99 ITR 592 (SC) also it was so held that where the language of a provision is manifestly clear and unequivocal, it has to be construed as it stands, according to its plain grammatical sense without addition or deletion of any words. It would not be permissible to use the speech of the Finance Minister to construe the clear language of the statute. 18. These two d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an ascertained goods/property. 4.3 Mr. Bhatt has also relied upon the following decisions in support of his submissions: (I) Bharat Petroleum Corpn. Ltd. and Another vs. N.R. Vairamani and Another reported in (2004) 8 SCC 579 paras 8 9 whereof read as under: 8. As rightly submitted by learned counsel for the appellants provisions similar to Sections 3 and 9 of the Tenants Act were not under consideration in Hindustan Petroleum's case (supra). 9. Courts should not place reliance on decisions without discussing as to how the factual situation fits in with the fact situation of the decision on which reliance is placed. Observations of Courts are neither to be read as Euclid's theorems nor as provisions of the statute and that too taken out of their context. These observations must be read in the context in which they appear to have been stated. Judgments of Courts are not to be construed as statutes. To interpret words, phrases and provisions of a statute, it may become necessary for judges to embark into lengthy discussions but the discussion is meant to explain and not to define. Judges interpret statutes, they do not interpret judgments. They interpre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at taking into account the facts on record and the question which have been posed for consideration of this Court as to whether the business loss suffered by the appellant is to be treated as speculation loss by applying the provisions of Explanation to Section 73 of the Act and will govern under Section 73 or Section 43 (5) of the Income Tax Act, this Court has considered the various decisions of different High Courts cited by the learned Counsel for the revenue. 6.1 In this regard, the decision in case of R.P.G. Industries Ltd. (supra) is relevant and has rightly been relied upon by the learned Counsel for the revenue. This Court is of the opinion that the explanation to Section 73 will have a bearing on the issue since the company is dealing with the purchase and sale of the shares and even considering the loss on different valuation of the shares, it will govern under the definition of the speculation loss, as also the assessee is doing the trading of the shares, which has been rightly held by the A.O. and confirmed by the Tribunal and it cannot get settle as business income with the other trading. Thus, this Court is in agreement with the view taken in the case of R.P.G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the assessment year for which the loss was first computed. Explanation to Section 73 reads as under : Where any part of the business of a Company [ ( 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 the principal business of which is the business of banking or the granting of Loans Advances) consists in the purchase and sale of shares of other companies, such company shall, for the purpose 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] . 5.2 In this regard, it shall also be useful to reproduce relevant paragraphs of the decision in the case of Khoday Distilleries Ltd. (supra) which read as under: 5. Shri Soli J. Sorabjee, learned senior counsel appearing on behalf of the appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res come into existence and in every case the words allotment of shares have been used to indicate the creation of shares by appropriation out of the unappropriated share capital to a particular person. 8. In our view, the judgment of this Court in Sri Gopal Jalan Company (supra) squarely applies to the present case. There is a vital difference between creation and transfer of shares. As stated hereinabove, the words allotment of shares have been used to indicate the creation of shares by appropriation out of the unappropriated share capital to a particular person. A share is a chose in action. A chose in action implies existence of some person entitled to the rights in action incontradistinction from rights in possession. There is a difference between issue of a share to a subscriber and the purchase of a share from an existing shareholder. The first case is that of creation whereas the second case is that of transfer of chose in action. In this case, when twenty shareholders did not subscribe to the rights issue, the appellant allotted them to the seven investment companies, such allotment was not transfer. In the circumstances, Section 4 (1)(a) was not applicable ..... X X X X Extracts X X X X X X X X Extracts X X X X
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