TMI Blog2022 (12) TMI 207X X X X Extracts X X X X X X X X Extracts X X X X ..... ming to this view, we take support from the judgment of the Supreme Court in the case of CIT vs. Alom Extrusions Ltd. [ 2009 (11) TMI 27 - SUPREME COURT] wherein Their Lordships were considering the amendment made by the Finance Act, 2003 by omitting the second proviso to section 43B of the Act w.e.f. 01/04/2004 and bringing about uniformity in the first proviso by equating 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. Being so, same issue cannot be taken up by Ld. Principal CIT in assessment year 2014-15 as this issue was already decided by the Tribunal in assessment year 2013-14. Hence, we decide this issue in favour of the assessee and against the revenue. - ITA No.40/Coch/2021 - - - Dated:- 13-9-2022 - Shri Chandr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs.11,46,336/-. The case was reopened by issuing a notice u/s 148 of the Income-tax Act,1961 ['the Act' for short] on 17.03.2018 for escapement of income to the tune of Rs.14,88,373/- by allowing wrong set off of loss in speculation business against business income as against the provisions contained in Explanation to section 73 of the Act. The reopened assessment was completed on 19.12.2018 by accepting the current year loss of Rs.71,46,337/- reported in the return dated 22.03.2018 filed in response to notice u/s 148 of the Act. 2. From perusal of records, it was noticed by the Ld. CIT(A) that the Assessment order under section 143(3) r.w.s. 147 of the Act dated 19.12.2018, passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interest of revenue for the reasons mentioned below: The Assessee Company, M/s F.G. Investments Pvt. Ltd. is carrying on business as a trader in shares and stock broker. It filed its return of income for the AY 2014-15 on 17.09.2014 with returned income as Nil with a claim for carry forward of current year loss of Rs.11,46,336/-. The return was processed u/s 143(1) on 29.03.2016, accepting the returned income. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on works out to be RS.53,838/-. AO has omitted to look into this aspect of the case. During the previous year, assessee had earned dividend income of Rs.97,709/- which is exempt u/s 10(34). This triggers the applicability of section 14A of the IT Act. However, it is seen that no disallowance u/s 14A(1) by applying Rule 8D as per section 14(2)/(3) has been made during the assessment. The omission to consider the above aspects during assessment has resulted in under assessment of income in the hands of the assessee for AY 2014-15. 3. The Principal CIT observed that the assessee has reported exempt income being dividend amounting to Rs.97,709/- in the ITR filed. AO has omitted to consider application of Rule 8D r.w.s. 14A during the course of assessment proceedings before him. Regarding wrong adoption of WDV, the assessee has fairly accepted it is a mistake on its part. AO has failed to notice this anomaly during the course of assessment. As regards deemed speculation loss, it was noticed by the Ld. CIT(A) that the AO has completed the assessment by accepting the contention of the assessee that amendment came into effect from 01.04.2015 with respect to explanation to sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O was bound to follow the said Tribunal order. Ld. A.R. submitted that from the above it can be noted that there was no error in the assessment order and the AO had completed the assessment based on the facts and law at the relevant point of time and he submitted that the AO was bound to follow the Tribunal s order for the earlier year and alleged that revision under section 263 of the Act was bad in law 4.2 Further, Ld. A.R. submitted that AO had merely followed the Cochin bench of Tribunal s decision in the assessee's own case for the earlier year and the same was not countered in the s.263 order. Ld. PCIT has merely concluded summarily that ... consequently, loss in speculation business which was allowed to be set off against business income by the AO is not correct . Ld. PCIT has not clearly brought out as to how the AO is wrong or in error. Hence the order under section 263 of the Act is not in order. Ld. A.R. relied on the decision of ITAT Cochin in ITA No.286/Coch/2020 dated 14.3.2022 in the case of Tulashi Subash vs. ITO. 5. The Ld. D.R. relied on the order of Ld. Principal CIT. 6. We have heard the rival submissions and perused the materials available ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3, 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 Taxation Laws (Amendment) Act, 1975 with effect from 01-04- 1977. Therefore, prior to 01-04-1977, if any assessee was carrying on any speculative transactions, i.e. a contract ultimately settled otherwise than by actual delivery; which are of such a nature to constitute a business, then such transactions are considered as speculation business. If the assessee incurs a loss in such business, then the loss from such speculation business can be adjusted only against profits of another speculation business as provided under section 73 of the Act. In other words, transactions prior to 01-04-1977, which were delivery based, were not treated as speculative transactions and hence the loss arising from such transactions was allowed to be adjusted against the income of the year under consideration. After the insertion of Explanation to section 73 of the Act, companies other than investment companies or finance companies carrying on business of purchase and sale of shares, then the loss from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shares in earlier years will not be allowed to be set- off against such profit from purchase and sale of shares to such companies in assessment year 2015-16. For this reason also, the amendment inserted to Explanation to section 73 of the Act by Finance (No. 2) Act, 2014 is to be applied retrospectively from the date of the insertion to Explanation to section 73 of the Act. [Para 5.6.3] Thus, the amendment inserted in Explanation to section 73 by Finance (No. 2) Act, 2014 with effect from 01-04-2015 is clarificatory in nature and would therefore operate retrospectively from 01-04-1977 from which date the Explanation to section 73 was placed on the statute since this amendment to section 73 of the Act'.... or a company the principal business of which is the business of trading in shares 'brings in the assessee whose principal business is trading of shares. Therefore, the loss incurred in share trading business by such companies, i.e. like the assessee will not be treated as speculation business loss but normal business loss, and hence the same loss can be adjusted against other business income or income from any other sources of the year under consideration. In this vie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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