TMI Blog2019 (9) TMI 610X X X X Extracts X X X X X X X X Extracts X X X X ..... aggregate of income/loss arising under non-business heads. In the case of Eastern Aviation and Industries Ltd. vs. CIT [ 1993 (7) TMI 41 - CALCUTTA HIGH COURT] has held that the expression income or profits and gains should be understood as including loss also so that in one sense profits and gains represent positive income whereas losses represent negative income. While judging the relative composition of GTI, one has to consider the absolute quantum of loss as against the other positive income. As per the decision, what one needs to consider and compare are the relative figures of loss and income. The ratio when applied, the chargeable amount under the head business income far exceeds the chargeable amount aggregated under non-business head. Thus, the shelter in the form of first exception is not available to the assessee. ' Scope of amendment - Alternative contention that the business of the assessee being mainly trading in shares and thus covered under third exception in view of the clarificatory amendment by Finance (No. 2) Act 2014 is also apparently bereft of any merits. The interpretation given by the Co-ordinate Bench in Fiduciary Shares and Stocks and Pv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s erred in not considering the vital submission that the assessee is engaged solely in the business of shares and securities trading and its derivative products and the mutual funds. The learned CIT(A) should have considered the submission for the same and should not have treated the business loss as speculation loss. No such treatment is called for. The loss of the appellant for Future Options and Equity Share Trading be treated as the business loss and the order of the learned CIT(A) and learned A.O. be reversed. 3. The learned CIT(A) should have considered the factual aspects of the assessee and also the submission made by the assessee and should not have misplaced the reliance on the judgment of CIT vs. DLF Commercial Developers Pvt. Ltd. 35texman.com 280 (page no 9 of the appeal order). The loss of the appellant from F O be treated as the business loss and the order of the learned CIT(A) and learned A.O. be reversed. 3.1 When the matter was called for hearing, the AR for the assessee submitted that the issue to be addressed is whether a company dealing in derivatives could be considered as engaged in speculative business by virtue of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon'ble Calcutta High Court held that once it is deemed to be a normal business loss on the basis of proviso appended to Section 43(5) of the Act, a question of applying Section 73 of the Act or the Explanation thereto for the purposes of refusing loss to be set off against business income is wholly incorrect. The Hon'ble Calcutta High Court after taking note of the decision of Hon'ble Delhi High Court in DLF Commercial (supra) took a distinct stand that derivatives cannot be treated at par with shares for the purposes of Explanation to Section 73 of the Act because the legislature has treated it differently. Thus, in view of the aforesaid position enunciated by the Hon'ble High Court in Asian Financial Services (supra), we find good deal of force in the case of assessee. The claim of the assessee thus requires to be allowed on this ground alone. 9.3 In view of the resounding conclusion drawn in favour of the assessee on the aforesaid legal position, we do not consider it necessary to advert to other alternative contentions raised on behalf of the assessee. 10. In the result, Ground No. 1 of the assessee s appeal is allowed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee relied upon the decision of the Hon ble Gujarat High Court in CIT vs. Paranjay Mercantile Ltd. (2014) 43 taxman.com 193 (Guj.) and CIT vs. Darshan Securities Pvt. Ltd. (2019) 18 taxman.com 142 (Bom.). 4.2 Secondly, and the alternative, the Ld. Senior Counsel for the assessee submitted that the principal business of the assessee company is the business of trading in shares and therefore the Explanation to sec. 73 would not apply in the light newly inserted exception to the Explanation. In elaboration, it was pointed out that Explanation to sec. 73 has no application to the assessee where the principal business is trading in shares by virtue of amendment brought in by Finance (No.2) Act, 2014 w.e.f. 01.04.2015. The Ld. Senior Counsel submitted that although the amendment has been brought w.e.f. 01.04.2015, that is, A.Y. 2015-16, the amendment being curative in nature is applicable with retrospective effect for earlier years as well. Reliance was placed on the decision of Co ordinate Bench in the case of Fiduciary Shares and Stock Pvt. Ltd. 159 ITD 554 (Mum.) for retrospective application of the amendment. The Ld. Senior Counsel thus submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reated as separate and distinct from ordinary profits and gains of business and profession. 5.2 At this juncture, we further note that sec. 43(5) defines speculative transaction which definition, of course, is for the purposes of sections 28 to 41. As per the said provision, speculative transaction means the transaction in which contract for purchase or sale of any commodity, including stocks and shares, is periodically or ultimately settled otherwise than by the actual delivery or transfer of the commodity or scrips. In terms of provisions of sec. 43(5), the business of the assessee in delivery based trading in shares would not be regarded as speculative business. Even the Revenue does not contend that the set off of loss from share trading is not permissible under sub-section (1) of sec. 73 but for the Explanation which is added at the end of the section. 5.3 Sec. 73 deals with losses incurred by an assessee in his speculation business. Losses computed in respect of speculation business is not allowed to be set off against income other than speculation income. From the plain reading of the Explanation to sec. 73, it can be seen that the Expla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unabsorbed depreciation) has been reported to be NIL as per the computation of income provided. Thus, the business loss clearly exceeds the aggregate of income/loss arising under non-business heads. The Hon ble Calcutta High Court in the case of Eastern Aviation and Industries Ltd. vs. CIT 208 ITR 1023 has held that the expression income or profits and gains should be understood as including loss also so that in one sense profits and gains represent positive income whereas losses represent negative income. The Hon ble High Court thus observed that while judging the relative composition of GTI, one has to consider the absolute quantum of loss as against the other positive income. As per the decision, what one needs to consider and compare are the relative figures of loss and income. The ratio when applied, the chargeable amount under the head business income far exceeds the chargeable amount aggregated under non-business head. Thus, the shelter in the form of first exception is not available to the assessee. 5.5 The alternative contention that the business of the assessee being mainly trading in shares and thus covered under third exception in view of the cl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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