TMI Blog1990 (3) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... "The assessee is a company and the reference relates to the assessment year 1977-78 for which the accounting period ended on March 31, 1977. For the year under reference, the assessee-company disclosed a loss of Rs. 1,56,087 from share-dealings. The Income-tax Officer disallowed the loss and treated the same as a loss incurred in speculation business on the basis of the amendment by way of Explanation to section 73 of the Income-tax Act, 1961, which came into force with effect from April 1, 1977. On appeal, the Commissioner of Income-tax (Appeals) confirmed the above action of the Income-tax Officer. The assessee filed a second appeal to the Income-tax Appellate Tribunal and it was contended on behalf of the assessee that the Explanation to section 73, on which reliance was placed by the lower authorities had no application, inasmuch as the assessee's only business was in share-dealings. It was claimed on behalf of the assessee that, in a case where the only business is in share-dealings, the Explanation can have no application and it applies when share dealing is only part of the business carried on by the assessee. It was contended on behalf of the Revenue that the Explanatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y material fact or failure to consider all relevant materials. There is no suggestion that the decision of the Tribunal is perverse in the sense that no reasonable man could come to the conclusion that the Tribunal had reached about the alleged money-lending transaction. The specific finding of the Tribunal is that "now, in this case, it has to be found out whether the sole business of the assessee is in share-dealings. The Commissioner of Income-tax (Appeals) held that there was money-lending business carried on by the assessee. The assessee's counsel pointed out that there was only one and single transaction of investing the surplus amount lying with the assessee in a concern temporarily for a brief period and, in that process, the assessee received interest of Rs. 1,740 only. This, according to counsel, does not amount to carrying on of money-lending business. There is great force in this submission. Carrying on of business is something different from mere investment of money. In order to constitute business, there should be an organised activity and not merely an isolated transaction. In this case, the assessee merely lent some surplus amount lying with it to one party for a te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and set off of business losses. If the net result of the computation under the head "Profit and gains of business or profession" is a loss and such loss cannot be or is not wholly set off against the income under any other head of income in accordance with the provisions of section 71, then the amount of loss which has not been set off can be carried forward to the following assessment year. Such losses carried forward from the previous year can be set off against the profits and gains of business in the subsequent assessment year. This rule is subject to the provisions that the business or profession in which the loss was originally incurred will have to continue to be carried on by the assessee in the previous year in which the loss is sought to be adjusted. In other words, if an assessee suffers loss in any business and closes down that business, then such loss cannot be carried forward and adjusted against profits of some other business in the subsequent assessment year. Section 72 specifically excludes loss sustained in speculation business from its ambit. That means that, when a loss is sustained in a speculation business, that cannot be carried forward to be adjusted again ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n from another source of non-speculation business, then such speculation loss cannot be set off against the profit from a non-speculation business. Sub-section (2) of section 73 restricts the scope of section 72 which provides for carrying forward and setting off of business losses. If any loss computed in respect of a speculation business has not been wholly set off, such loss may be carried forward and set off against profits and gains of any speculation business in the following assessment years. The Explanation to section 73 introduces a legal fiction. The section applies only to a company. It does not apply to individuals, firms, Hindu undivided families or associations of persons. The Explanation also does not apply to an investment company or a company whose principal business is banking or money-lending. If the business of a company which does not fall within the excluded categories consists of purchase and sale of shares of other companies, then such a company shall be deemed to be carrying on speculation business for the purpose of section 73 to the extent to which the business consists of the purchase and sale of such shares. Dr. Pal's contention is that although ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business. Thus, in the case of the aforesaid companies, the losses from share dealings will now be set off only against profits or gains of a speculation business. Where any such loss for an assessment year is not wholly set off against profits from a speculation business, the excess will be carried forward to the following assessment year and set off against profits, if any, from any speculation business." On the strength of this circular, Dr. Pal has argued that the object of the statute was to curb the device of business houses to create an artificial loss in share dealing so as to reduce income from other business activities. It has been contended that the Explanation should be understood in the light of the aforesaid circular I am unable to uphold this contention for a number of reasons. The Explanation to section 73 applies to certain categories of companies. The opening words of the Explanation to section 73 "where any part of the business of a company" also do not create any difficulty. Fry L. J. observed in the case of Duck v. Pitt (12 QBD 79) that "any" is a word which excludes limitation or qualification. In the case of Liddy v. Kennedy [1871] LR 5 HL 134, it was h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds 'any ward of the Municipal Borough' should be understood to mean 'every ward of the Municipal Borough'." The Supreme Court in the case of Chief Inspector of Mines v. Lala Karam Chand Thaper, AIR 1961 SC 838, 847; [1961-62] 20 FJR 282, 296, [1962] 1 SCR 9, also came to the conclusion that "any one of the directors" in section 76 of the Mines Act, 1952, meant "every one of the directors ". In that case, Das Gupta J. observed at pp. 28,29 as follows : "If one examines the use of the words 'any one' in common conversation or literature, there can be no doubt that they are not infrequently used to mean 'every one' not one, but all. Thus we say 'any one can see that this is wrong', to mean 'every one can see, that this is wrong'. 'Any one may enter', does not mean that 'only one person may enter', but that all may enter. It is permissible and indeed profitable to turn in this connection to the Oxford English Dictionary at page 378 of which we find the meaning of 'any' given thus : 'in affirmative sentences, it asserts concerning being or thing of the sort named, without limitation as to which and thus collectively of every one of them'. One of the illustrations given is 'I challen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rzinski, where the words 'any of them' were held to be the equivalent of 'any one of them'." Therefore, the legal implication of the phrase "any part of the business of a company" does not create any difficulty. Dr. Pal has not been able to cite any case where the word "any" has been used in a restrictive sense so as not to include "all". Moreover, we fail to see why "part" should not include "the whole" in this case as suggested by Dr. Pal. Such construction of statute always leads to absurdity. If the municipality is empowered to demolish a part of the building and if it is found to be dangerous, can it be rationally suggested that, if the entire building is dangerous, the municipality has no right to order demolition of the entire building ? There is no reason why the phrase "any part of the business" should be given a restrictive sense so that when a company's business consisted of purchase and sale of shares as well as some other business activities, such company should not come within the mischief of the Explanation to section 73. Plain words of the statute do not warrant the construction suggested by Dr. Pal. The phrase "to the extent to which the business consisted of p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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