TMI Blog2018 (9) TMI 2104X X X X Extracts X X X X X X X X Extracts X X X X ..... g tax, duty cess and fees with contribution to welfare funds viz. Provident Fund, etc. The Supreme Court held that the aforesaid amendment in section 43B of the Act by Finance Act, 2003 is curative in nature and would therefore apply retrospectively w.e.f. 01/04/1988. In the present case, the principle business of the assessee is trading in shares. Hence, deemed speculative loss from trading in shares is to be set off of against the business income of the assessee. This ground of the assessee is allowed. CIT initiated the proceedings u/s. 263 of the Act based on the recommendations of the AO - We find that this argument is not based on any material borne on record. Accordingly, this argument of the Ld. AR is rejected. Judicial discipline requires consistency in the income tax proceedings - According to the Ld. AR res judicata does not apply to income tax proceedings. Though, each assessment year being a unit, what was decided in one year might not apply in the following year; where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o allow the position to be changed in a subsequent year, in the absence of any material change justifying the Revenue to take a different view of the matter. For this proposition, the Ld. AR relied on the judgment of the Supreme Court in the case of Radhasaomi Satsang vs CIT (193 ITR 321). Hence, it was submitted that the revision under 263 was bad in law for this reason as well. 3.2 The Ld. AR further submitted that there was an amendment by Finance Act (No. 2), 2014 with effect from assessment year 2015-16 making the provisions of the explanation not applicable to a company whose principal business is purchase and sale of shares. It was submitted that the insertion of the amendment in the Explanation to section 73 of the Act by the Finance (No. 2) Act, 2014, is curative and classificatory in nature and hence, applicable for earlier assessment years also. For this purpose, the Ld. AR relied on the decision of 1TAT, Mumbai bench in the case of Fiduciary Shares Stock Private Ltd vs ACIT (159 1TD 554) . Thus, according to the Ld. AR, there was no error in the assessment since assessing authority had taken one of the possible views and hence, the action under section 263 was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as deemed speculation loss and it is a normal business loss. Hence, the same could be adjusted with the business income of the assessee. We find force in this argument of the Ld. AR as this issue was considered by the ITAT, Mumbai Bench in the case of Fiduciary Shares Stocks Private Ltd. vs. ACIT (159 ITD 554) and it was held as under: Section 73 stipulates that any loss computed in respect of speculation business shall not be set-off except against profits and gains of speculation business. Section 43(5) clarifies 'speculative transaction' to mean a transaction in which a contract for purchase or sale of any commodity including stock and shares is periodically or ultimately settled otherwise than by actual delivery. Explanation 2 to section 28 stipulates that where speculative transactions carried on by an assessee are of such a nature so as to constitute a business, the speculation business shall be deemed to be distinct and separate from other business. Sections 73, 43(5) and Explanation 2 to section 28 of the Act are on the statute since 01-04-1962. Pursuant to the Wanchoo Committee Report of December, 1971, Explanation to section 73 was inserted by the Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng in shares. The amendment has removed the anomaly and brought the ambit of the Explanation to section 73 of the Act in line with the intention of the Legislature by placing the companies whose principal business is trading in shares as part of the exception to Explanation to section 73 of the Act, because such companies were not the companies for whom the Explanation was inserted. The insertion of the amendment in the Explanation to section 73 of the Act by the Finance (No. 2) Act. 2014, is curative and classificatory in nature. If the amendment is applied prospectively from assessment year 2015-16, a piquant situation would arise that an assessee who has earned profit from purchase and sale of shares in assessment year 2015-16 would be treated as normal business profit and not speculation business profit in view of the exception carried out by the amendment in Explanation to section 73 of the Act. In these circumstances, speculation business loss incurred by trading in shares in earlier years will not be allowed to be setoff against such profit from purchase and sale of shares to such companies in assessment year 2015-16. For this reason also, the amendment inserted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made an argument that the CIT initiated the proceedings u/s. 263 of the Act based on the recommendations of the Assessing Officer. However, we find that this argument is not based on any material borne on record. Accordingly, this argument of the Ld. AR is rejected. 5.4 Further, the argument of the Ld. AR is that judicial discipline requires consistency in the income tax proceedings and for this purpose he relied on the judgment of the Supreme Court in the case of Radhasaomi Satsang vs. CIT (193 ITR 321). According to the Ld. AR res judicata does not apply to income tax proceedings. Though, each assessment year being a unit, what was decided in one year might not apply in the following year; where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order; it would not be at all appropriate to allow the position to be changed in a subsequent year. However, in the present case, nonconsideration of one issue in one assessment year does not give vested right to the assessee to derive benefit from such an error committed by the Assessing Offi ..... 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