TMI Blog2017 (8) TMI 1450X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act for treating the principal business of share trading under exception category with retrospective effect in nature. The principal business of the assessee is of share trading. Therefore, the impugned loss cannot be treated as speculative by virtue of the provision of Explanation to Section 73 of the Act. - Decided in favor of assessee. - ITA No.610/Kol/2017 - - - Dated:- 30-8-2017 - Waseem Ahmed, Accountant Member and Shri S.S.Viswanethra Ravi, Judicial Member For the Appellant : Shri Miraj D Shah, Advocate For the Respondent : Shri Banibrata Dutta, Addl. CIT-DR ORDER PER Waseem Ahmed, Accountant Member:- This appeal by the assessee is against the order of Commissioner of Income Tax (Appeals)-17, Kolkata dated 28.10.2016. Assessment was framed by ITO Ward- 6(2), Kolkata u/s 115WE(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) vide his order dated 30.12.2010 for assessment year 2008-09. The grounds raised by the assessee per its appeal are as under:- 1. For the facts and circumstances of the case the appellate order passed was in violation of principals of natural justice hence is bad in law and be quashed. 2. Fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nation to Section 73 of the Act. However, AO disregarded the contention of assessee by observing that income from interest and consultancy was classified by the assessee under the head business and therefore the stand taken by it is just to escape from the provision of Explanation to Section 73 of the Act. Accordingly, AO treated the loss of ₹11,87,934/- as speculation in nature and allowed to be carried forward to the subsequent years for setting of the same against the speculation profit only. 4. Aggrieved, assessee preferred an appeal before Ld. CIT(A).The assessee before Ld. CIT(A) submitted its business income and income from other source as detailed under:- Income from shares (business income) Share loss (Rs.11,87,934) Interest Rs.6,65,459 Net business income form shares Rs.5,22,475 Income from interest consultancy (under head income from other sources) as per assessee Rs.7,20,000 From the above, assessee justified that the income from other sources exceeds the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with this computation of the AO, to which they do not agree, Explanation to Section 73 is not applicable as the income under the head other sources still exceeds the income under the head income from business and profession. However, on perusal of the assessment order it is seen that the contention of the assessee regarding the computation of income claimed to have been made by the AO is incorrect. The AO in fact has assessed the entire income of the assessee under the head income from business and profession. The AO in his assessment order has commented on the interest income and the consultancy income as follows: The assessee has further claimed that interest income of ₹ 665459/- and consultancy of ₹ 720000/- are to be treated as in from other sources to save the company from the purview of explanation to Section 73 of the IT Act. However, in the IT return and computation of AYr. 2008-09 as reflected in AST Module, the interest and consultancy income have been shown as business income. No revised return / computation was filed by the assessee company. The assessing officer has verified the return of the assessee and has given a definite finding that the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cipal business of the assessee has relied on the order of Co-ordinate Bench of this Tribunal in the case of DCIT vs. Venkateswar Investment 93 ITD 177 (Kol). Ld. AR also submitted that there is an amendment under the provision of Explanation to Section 73 of the Act with effect from 01.04.2015 wherein an exception was granted to the company of which the principal business was trading in shares. Though this amendment was brought under the Statute with effect from 01.04.2015 but various courts have held that it is retrospective in nature. In this connection, Ld. AR has relied on the order of this Tribunal in the case of DCIT vs. Raima Equates Pvt Ltd. in ITA No.1994/Kol/2013 vide order dated 11.08.2016. Thus, in view of above, the ld. AR stressed that the principal business of the assessee is granting of loan and share trading which is falling under the exception category. Therefore, this impugned loss cannot be treated as speculation in nature. Ld. AR in justifying the principal business of the assessee has produced a chart which is showing the income of the assessee in the earlier years as well as in the subsequent years. Such chart of the assessee is enclosed at page 23 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extracted hereunder:- A tax avoidance device often resorted to by business houses controlling groups of companies is manipulation of results from dealings in shares of the companies controlled by them. In our opinion, such manipulation in share dealings for the purpose of tax avoidance can be checked effectively if the results of dealings in shares by such companies are treated for tax purposes in a manner analogous to speculation. No doubt, companies whose main business activities centre around investment in shares will have to be left out. Accordingly, we recommend that the results of dealings in shares by companies, other than investment, banking and finance companies, should be treated in a manner analogous to speculation business. 3.7.1. We find that in order to achieve the real objective of curbing tax avoidance methods resorted to by business houses controlling their group companies, the legislature by inserting an amendment to Explanation to Section 73 of the act by Finance Act 2014, has extended the exception carved out in the Explanation by putting all the companies, the principal business of which is the business of trading in shares into the exception. We find t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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