TMI Blog2006 (3) TMI 187X X X X Extracts X X X X X X X X Extracts X X X X ..... anguage of the provisions of Explanation to section 73 of the Act which requires no external aid, like object etc. to construe them differently and therefore, the loss suffered on account of acquisition by allotment and sale thereof being in denature of loss arising on purchase and sale of shares of a company and also being in the nature of business of the assessee being purchase and sale of shares of other companies is to be taken as a speculative loss. The appeal of the assessee is dismissed. - Member(s) : R. P. GARG., I. S. VERMA., R. P. TOLANI. ORDER Per R.P. Garg, Vice-President.- The President, Income-tax Appellate Tribunal vide order under section 255(3) of the Income-tax Act, 1961 constituted a Special Bench for the aforesaid appeal and to consider the following question: "Whether on the facts and in the circumstances of the case, loss arising from sale of shares applied for by a dealer and allotted to it in Public Issue is hit by Explanation to section 73 of the Income-tax Act, 1961?" 2. The assessee is engaged in the business of trading in cloth and shares. During the year under consideration sales of cloth have been shown at Rs. 10,93,95,764 and the sales of shares at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hares from primary market being totally different from the manner, method and procedure of purchase of shares from open market; he observed that such procedure as is involved in the purchase of shares primary market and the secondary market does not form part of any primary and basic condition which needs to be satisfied by deciding whether the activity constitutes purchase and sales or not. Therefore, the irrelevance and non-applicability of such procedural difference, as may or may not exist, is not only apparent but is also established. He thus rejected the contention of the assessee that the purchase of shares from the primary market and loss amounting to Rs. 64,13,808 incurred on the sale of such shares does not fall within the purview of being categorized as speculated loss under the provisions of Explanation to section 73 of the Act. 4. Before the CIT(A) the assessee relied upon three cases - (i) Sri Gopal Jalan Co. v. Calcutta Stock Exchange Association Ltd. AIR 1964 SC 250; (ii) Morgen Stanley Mutual Fund v. Kartick Das [1994] 4 SCC 225; (iii) Laxmi Feeds Exports Ltd. v. Asstt. CIT [1997] 62 ITD 315 ITAT, Mumbai; and a Board Circular No. 204, dated 24-7-1976. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of section 73, a passing reference was made to one of the various objects for which the amendment was made. Without doubt such reference cannot be construed to be the sole objective behind inserting the entire explanation, the language of which nowhere suggest that the stated objective in the circular No. 204 was to be treated as the exclusive objective. In the instant case and particularly in the case of Explanation to section 73, no such ambiguity exists. He accordingly held that the application of the said section is required to be made solely on the strength of the meaning emerging out of the plain reading without being influenced by an incomplete narration of the objectives. 4.2 As regards contention of the assessee that it has not purchased shares and it has only acquired the shares and as such it has not purchased and sold shares in terms of provisions of Explanation to section 73 of Income-tax Act, the CIT(A) held that the assessee had invested money for purchasing the shares of companies and it has sold the shares also and therefore, so far as purpose and intent of Explanation to section 73 of the Act is concerned, the assessee very much comes within the purview of thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsidered and unless it is conclusively established that the assessee entered into the transaction clearly as a speculative venture, the courts cannot infer the transaction to be a speculative venture only because the assessee derived subsequently the benefit of tax reduction. For this proposition, he relied on the decision of the Karnataka High Court in the case of Mysore Rolling Mills (P.) Ltd. v. CIT [1992] 195 ITR 404 as well as the aforesaid Circular No. 204. 5.2 On acquisition versus purchase of shares being the original and main issue the learned counsel for the assessee submitted that the assessee was carrying business of dealing in shares in three modes, i.e., purchase and sale of shares on delivery basis in the open market; purchase and sale of shares on Badla basis; and making application for allotment of shares in public issue and sell such shares. Net result of business carried on in above three modes was loss of Rs. 62,02,033, Profit of Rs. 50,72,408 and loss of Rs. 64,13,808 respectively. The learned counsel contended that Explanation to section 73 was not applicable to sale of shares acquired by making application for allotment of shares in public issue. He relied up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in value of shares was held to be covered by Explanation to section 73 of the Act. He further referred to the decision of Calcutta High Court in the case of CIT v. Arvind Investments Ltd. [1991] 192 ITR 365 to contend that the Circular does not advance the case of the assessee. He also relied upon the decision of Dy. CIT v. Aakrosh Investment Leasing (P.) Ltd. [2004] 90 ITD 287 and contended that this decision squarely applies to the facts of the assessee's case before us and provides a direct answer to the arguments of the learned counsel for the assessee that the assessee does not fall within the purview of Explanation to section 73 because in the year of account, there was only purchase and sale of shares. It is clearly held in the decision that Explanation to section 73 does not require that both purchase and sale of shares should take place in the same year. Referring to the Calcutta High Court in the case of CIT v. Sun Distributors Mining Co. Ltd. [1993] 68 Taxman 223 the Ld. DR contended that what is to be seen is whether the business of the assessee consists of purchase and sale of shares. He also referred to the provisions of Sale of Goods Act and the meaning of the terms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arrated in 89 ITR (St.) 107 read as under: "The main objectives of the amendments proposed to be made are to unearth black-money and prevent its proliferation; to fight and curb tax evasion; to check avoidance of tax through various legal devices, including the formation of trusts and diversion of income or wealth to members of family; to reduce tax arrears and to ensure that in future, tax arrears do not accumulate; to rationalize the exemptions and deductions available under the relevant enactments, and to streamline the administrative set-up and make it functionally efficient;" 7.2 This statement is not specific to any particular provision but to the Amendment Act as a whole and talks about many objectives one of which is to fight and curb tax evasion. Nothing is specifically mentioned about the alleged avowed object with regard to the impugned Explanation. Clause 16 of the Noted on clauses however dealing with this insertion on the other hand reads rather as under: "This clause seeks to add an Explanation to section 73 of the Act. The proposed Explanation seeks to treat the business of purchase and sale of snares by companies, which are not investment, banking or finance compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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. It is only in later paragraph 19.2 the d Board has speculated the object of this provision as to curb the device sometimes resorted to by business houses controlling groups of companies to manipulate and reduce the taxable income of companies under their control. That is not the aim and object of the Amendment Bill nor stated anywhere else in the Parliament. It is the view expressed by the CBDT and thus its own creation. It cannot be equated with the object for introducing the bill debated in the Parliament. It is also not the sole object and the later part of the circular is contra to the earlier paragraph. Be that as it may, even if it be assumed the object of the statute it cannot be the ground for construing the provisions of a statute when the language is clear, certain and unambiguous for the reasons discussed in subsequent parag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e it states: "The particular provision with which we are concerned took effect from 1st April, 1977. However, even before it took effect, the circular was issued on 24th July, 1976 and this I consider to be of significance in the sense that the Assessing Officers were sought to be guided, even before they could invoke the Explanation, by pointing out to them that the Explanation shall not be invoked indiscriminately but should be invoked only if there is any manipulative device adopted-by business houses as mentioned in para 19.2 of the circular. It is also of significance that the Explanation applies only to companies and that too only to a limit category of companies. Other assessable entities are excluded. All this is a clear pointer, in my humble opinion, to the position that only if there is reason to believe that a device is being adopted by the companies to reduce their taxable income shall the Explanation be invoked. The intention of the Legislature is also made clear by excluding other categories of assessable entities from the sweep of the provision. For instance, an individual or a partnership firm is excluded from the operation from the Explanation. The reason is not fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... outside consideration can be called in aid to find that intention". 11.2 Again in Turner Morrison Co. Ltd. v. CIT [1953] 23 ITR 152 (SC) it was stated that. "The Courts have to construe the statute according to the plain language and tenor thereof and if any untoward consequences result therefrom, it is for authority other than the Court to rectify or prevent the same". 11.3 In CIT v. Ajax Products Ltd [1965] 55 ITR 741 (SC), it was observed that "If the words of a statute are precise and unambiguous, they must be accepted as declaring the express intentions of the Legislature". 11.4 In CIT v. Shahzada Nand Sons [1966] 60 ITR 392 (SC), it is said that "In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used. To this may be added a rider: in a case of reasonable doubt, the construction most beneficial to the subject is to be adopted. The underlying principle is that the meaning an intention of a statute must be construed from the plain and unambiguous expression used therein r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch 31, 1964, but before April 1, 1972. Gifts made earlier would not attract the benefit of the exemption. In that connection, the court observed at page 106 as under:- "One of the pillars of statutory interpretation, viz., the literal rule; demands that, if the meaning of the statutory provision is plain, the court must apply it regardless of the result." "The very concept of interpretation connotes the introduction of elements which are necessarily extrinsic to the words in the statute. Though the words "interpretation" and "construction" are used interchangeably." The idea is somewhat different. Dr. Patrick Devlin says: '... A better word, I think, would be construction, because construction, although one often used it alternatively with interpretation, suggests that something more is being got out in the elucidation of the subject-matter than can be got by strict interpretation of the words used. In the very full sense of the word 'construction', the judges have set themselves in this branch of the law to try to frame the law as they would like to have it ....'" "A statute", says Max Radin, "is neither a literary text nor a divine revelation. Its effect is, therefore, neither an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Merged States (Taxation Concession) Order, 1949 will not be included in the net wealth of the assessee and therefore, the buildings of Khas Bagh Palace which were let to different persons and for which rent was received, were not in the occupation of the assessee within the meaning of section 5(1)(iii) of the Act and in that context the Supreme Court observed that the intention of the Legislature is primarily to be gathered from the language used. Just as it is not permissible to add words or to fill in a gap or lacuna, similarly it is of universal application that effort should be made to give meaning to each and every word used by the Legislature. 12.2 The Supreme Court in the case of Orissa State Warehousing Corpn. v. CIT [1999] 237 ITR 589, while dealing with a case under section 10(29) of the Act granting exemption to the income which is derived from letting out of godown or warehouse for storage, processing or facilitating marketing of commodities, held that the Legislature has been careful enough to introduce in the section itself a clarification by using the words "any income derived therefrom", meaning thereby obviously for marketing of commodities by letting out of go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Co. v. CIT [1990] 183 ITR 1 also lends concurrence to the views expressed above. This court observed: "As long as there is no ambiguity in the statutory language, resort to any interpretative process to unfold the legislative intent becomes impermissible. The supposed intention of the Legislature cannot then be appealed to whittle down the statutory language which is otherwise unambiguous. If the intendment is not in the words used, it is nowhere else. The need for interpretation arises when the words used in the statute are, on their own terms, ambivalent and do not manifest the intention of the Legislature .... Artificial and unduly latitudinarian rules of construction, which with their general tendency to 'give the taxpayer the breaks', are out of place where the legislation has a fiscal mission. Be it noted that individual cases of hardship and injustice do not and cannot have any bearing for rejecting the natural construction by attributing normal meanings to the words used since "hard cases do not make bad laws". In fine thus, a fiscal statute shall have to be interpreted on the basis of the language used therein and not de hors the same. No words ought to be added and only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es the tax makes a substantive provision in this behalf". A Constitution Bench of this court speaking through one of us (S.P. Bharucha) in the case of V.V.S. Sugars v. Government of A.P. [1999] 114 STC 47; [1999] 4 SCC 192 reiterated the proposition laid down in the India Carbon Ltd's case [1997] 106 STC 460 in the following words (headnote of [1999] 4 SCC): "The Act in question is a taxing statute and, therefore, must be interpreted as it reads, with no additions and no subtractions, on the ground of legislative intendment or otherwise." If we apply this principle in interpreting section 220 of the Act, we find that the condition precedent for invoking the said section is only if there is a default in payment of the amount demanded under a notice by the Revenue within the time stipulated therein and if such a demand is not satisfied then section 220(2) can be invoked." 13.1 The five Judges Constitutional Bench of the Supreme Court in the case of Padmasundara Rao v. State of Tami Nadu [2002] 255 ITR 147 while discussing the period of limitation for declaration, the court reaffirmed the literal rule and held that the language of section 6 of the Land Acquisition Act, 1984, is plain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of CIT v. Deep Chand [2002] 257 ITR 756 in the context of section 2(14)(iii)(a) and in the case of CIT v. National Agricultural Co-operative Marketing Federation of India Ltd. [1999] 236 ITR 766 (Delhi), while dealing with Rule 6AA inserted with effect from 1-8-1981 for the purposes of section 35B of the Act. It was held: "Where the language is plain, it can neither be stretched wider nor squeezed narrowly with an eye on the assumed or implied intention of the Legislature. In a fiscal law much scope for interpretative process is not available if the language of an enactment permits of no ambiguity. It also observed: "It is now a well-settled principle of law that a literal meaning should be attributed to a statute. The golden rule of interpretation should ordinarily be adhered to. Again in the case of CIT v. Cement Distributors Ltd. [1994] 208 ITR 355 (Delhi) and in the case of CIT v. Bansal Credits Ltd [2003] 259 ITR 69 (Delhi) it observed "The cardinal rule of interpretation is that the statute must be construed to its plain language and neither should anything be added nor should something be subtracted therefrom unless there are adequate grounds to justify the inference that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of literal construction is firmly established and it has received judicial recognition from the courts in India in numerous cases. Therefore, where the language of the statute is clear and explicit, effect must be given to it, for in such a case the words best declare the intention of the Legislature. It is only from the language of the statute that the intention of the Legislature must be gathered, for the Legislature means no more and no less than what it says. It is not permissible for the court to speculate as to what the Legislature must have intended and then to twist or bend the language of the statute to make it accord with the presumed intention of the Legislature. The clear provision of the statute cannot be given an artificial extended meaning by resorting to the so-called principles of interpretation. The duty of the court always is to find out what the Legislature really meant by the expression which it has used. For that purpose, it may consider the context and any other parts of the Act which throw light upon the intention of the Legislature. It must not be forgotten that the duty of the court is to interpret the law made by the Legislature with a view to ascertaini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Sons [1966] 60 ITR 392 (SC), it was observed that "When the words of a section are clear, but its scope is sought to be curtailed by construction, the approach suggested by Lord Coke in Heydon's case [1584] 3 Rep. 7b yields better results. To arrive at the real meaning, it is alwavs necessary to get an exact conception of the aim, scope and object to the whole Act; to consider, according to Lord Coke, 1. what was the law before the Act was passed; 2. what was the mischief or defect for which the law had not provided; 3. what remedy Parliament has appointed; 4. the reason of the remedy. In Sevantilal Maneklal Sheth v. CIT [1968] 68 ITR 503, the Supreme Court again observed that it is a sound rule of interpretation that a statute should be so construed as to prevent the mischief and to advance the remedy according to the true intention of the makers of the statute. In K.P. Varghese v. ITO [1981] 131 ITR 597 (SC) also it was observed that "The task of interpretation of a statutory enactment is not a mechanical task. It is more than a "mere reading or mathematical formulae because few words possess the precision of mathematical symbols. It is an attempt to discover the intent of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 61, has been enacted, Parliament cannot "choose to tax as " income an item which in no rational sense can be regarded as a citizen's income or even receipt. Sub-section (2) would, therefore, on the construction of the revenue, go outside the legislative power of Parliament and it would not be possible to justify it even as an incidental or ancillary provision or a provision intended to prevent evasion of tax. Sub-section (2) would also be violative of the fundamental right of the assessee under article 19(1)(f)- which fundamental right was in existence at the time when sub-section (2) came to be enacted-since on the construction canvassed on behalf of the revenue, the effect of sub-section (2) would be to penalise the assessee for transferring his capital asset for a consideration lesser by 15% or more than the fair market value and that would constitute unreasonable restriction on the fundamental right of the assessee to dispose of his capital asset at the price of his choice. The court must obviously prefer a construction which renders the statutory provision constitutionally valid rather than that which makes it void". AIDS TO CONSTRUCTION 15. Aids to construction like legislati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al - sense without addition or deletion of any words. It would not be permissible to use the speech of the Finance Minister to construe the clear language of the statute. 15.3 Statement of Objects and Reasons can be referred to for the purpose of ascertaining the circumstances which led to the legislation in order to find out what was the mischief which the legislation aimed at. "It is well-settled that when the language of the statute is clear and admits of no ambiguity, recourse to the Statement of Objects and Reasons for the purpose of construing a statutory provision is not permissible". S.C. Prashar v. Vasantsen Dwarkadas [1963] 49 ITR 1 (SC) and In Govind Saran Ganga Saran v. CST [1985] 155 ITR 144 (SC). 15.4 In CIT v. K. Srinivasan K. Gopalan [1953] 23 ITR 87 the Supreme Court observed that Views of the Select Committee are not a permissible consideration in interpreting a statutory provision. Similarly in CIT v. Vadilal Lallubhai [1972] 86 ITR 2 (SC) it is said that "In order to find out the legislative intent, one has to find out what was the mischief that the Legislature wanted to remedy, and if a provision is considered ambiguous, it is not inappropriate to refer to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... debt. The proviso to section 46(1)(b) does not merely enunciate a rule of evidence but should be read as part and parcel of the entire object of Parliament contained in section 46(1)(b) with regard to the extent of the abatement of the debt and the extent of cutting down of the abatement, both put together". 17. In the case of K.P. Verghese v. ITO [1981] 131 ITR 597, the Supreme Court dealt with the issue arising under section 52(2) of the Act and held this sub-section can be invoked only where the consideration for the transfer of a capital asset has been understated by the assessee, or, in other words, the full value of consideration in respect of the transfer is shown at a lesser figure than that actually received by the assessee, and the burden of proving such understatement or concealment is on the revenue. The sub-section has no application in the case of an honest and bona fide transaction where the consideration received by the assessee has been correctly declared or disclosed by him. The task of interpretation of a statutory enactment, the court observed, is not a mechanical task. It is more than a mere reading of mathematical formulae because few words possess the precisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f fairness and justice that in such cases, where there is clearly no understatement of consideration in respect of the transfer and the transaction is perfectly honest and bona fide and, in fact, in fulfilment of a contractual obligation, the assessee, who has sold the property, should be liable to pay tax on capital gains which have not accrued or arisen to him? It would indeed be most harsh and inequitable to tax the assessee on income which has neither arisen to him nor is received by him, merely because he has carried out the contractual obligation undertaken by him. It is difficult to conceive of any rational reason why the Legislature should have thought it fit to impose liability to tax on an assessee who is bound by law to carry out his contractual obligation to sell the property at the agreed price and honestly carries out such a contractual obligation. It would indeed be strange if obedience to the law should attract the levy of tax on income which has neither arisen to the assessee nor has been received by him. If we may take another illustration, let us consider a case where A sells his property to B with a stipulation that after some time which may be a couple of years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f section 52(2). It then referred to the provisions of sub-section (1) of section 52 which restricted its operations to persons who are directly or indirectly connected with the assessee and the object of under-statement was to avoid or reduce the income-tax liability. It observed that there may be cases where the consideration for the transfer is shown at a lesser figure than that actually received by the assessee but the transferee is not a person directly or indirectly connected with the assessee or the object of understatement of the consideration is unconnected with tax on capital gains and such cases being not covered by sub-section (1), the Parliament enacted sub-section (2) with a view to extending the coverage of the provision in sub-section (1) to other cases of under-statement of consideration and this was found clear by having regard to the object and purpose of introduction of sub-section (2) as appearing from travaux preparatoire relating to the enactment of that provision. It states that it would, therefore, be legitimate in interpreting sub-section (2) to consider what was the mischief and defect for which section 52 as it then stood did not provide and which was so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot pitchforked it into section 52 with a total stranger under an inappropriate marginal note. It observed that there is inherent evidence in sub-section (2) which suggests that the thrust of that sub-section is directed against cases of under-statement of consideration. The crucial and important words in sub-section (2) are: "the full value of the consideration declared by the assessee". The word "declared" is very eloquent and revealing. It clearly indicates that the focus of sub-section (2) is on the consideration declared or disclosed by the assessee as distinguished from the consideration actually received by him and it contemplates a case where the consideration received by the assessee in respect of the transfer is not truly declared or disclosed by him but is shown at a different figure. The other circumstance which strongly reinforces the view taken by it was the issuance of the Circular by the Board explaining the scope and object of section 52(2) was introduced with a view to countering evasion of tax on capital gains through the device of an understatement of the full value of the consideration received or receivable on the transfer of a capital asset. The circular drew ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of the terms used therein and the wider meaning thereof "at any time" in the Madras case and language of sub-section (2) of section 52 of the Act in case before Supreme Court were giving absurd and unconstitutional results and therefore, resort was had to the objects and reasons for introducing the provision. That in the 1st case was that the term "at any time" might include even the property inherited or by testamentary succession. It was therefore, the meaning to the term was given restricting it to 'derivation of property prior to advance of the debt or loan' and 'because at the time when property became part of creditors' resources there must be some nexus between the resources and the consideration for the debt.' Similarly in the 2nd case the wide language in section 52(2) was giving rise to tax an item which was not income or even receipt and therefore, outside the legislative powers of the Parliament and also violative of fundamental rights enshrined under article 19(1)(f) of the Constitution. There is nothing of that sort in this case. There is no ambiguity also in the language used. Putting the share dealing transactions in one category is a reasonable classification an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... separate venture or business. The nature of the assessee's business in general, the purpose behind the particular transaction, the effect of the transaction, etc. arc all to be considered. Unless it is conclusively established that the assessee entered into the transaction clearly as a speculative venture, the courts cannot infer the transaction to be a speculative venture only because the assessee derived subsequently the benefit of tax reduction". It only stated that the Explanation to section 73 does not apply to purchaser and sale of shares as investment and that a transaction cannot be treated speculative merely because some tax reduction to the assessee. This case therefore, does not help us in solving the issue at issue in this case. 20. We however find a direct decision of the Calcutta High Court in the case of CIT v. Arvind Investments Ltd. [1991] 192 ITR 365 wherein dealing with a similar contention of the assessee the Court answered as under: "The circular on which reliance has been placed also does not advance the case of the assessee in any way. The object as stated in the circular is to curb the device to manipulate and reduce the taxable income of a company under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les reads: "4. Sale and agreement to sell.-(1) A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price. There may be a contract of sale between one part-owner and another. (2) A contract of sale may be absolute or conditional. (3) Whereunder a contract of sale the property in the goods is transferred from the seller to the buyer, the contract is called a sale, but where the transfer of the property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled, the contract is called an agreement to sell. (4) An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled subject to which the property in the goods is to be transferred. 5. Contract of sale how made.-(1) A contract of sale is made by an offer to buy or sell goods for a price and the acceptance of such offer. The contract may provide for the immediate delivery of the goods or immediate payment of the price or both, or for the delivery or payment by instalments, or that the delivery or payment or both shall be postponed. (2) Subject to the provisions of any law for the ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... word "sale"; secondly, the quoted sentence from the Supreme Court judgment is only half. The other half which is left unquoted by the ld. counsel is: "Absent such compelling mutation of sense, the speech of the lay is also the language of the law."; and thirdly, the court itself had adopted the general meaning of the word 'purchase' by stating in the following paragraph: "We find no reason to divorce the ordinary meaning of the word "purchase" as buying for a price or equivalent of price by payment in kind or adjustment towards an old debt or for other monetary consideration from the legal meaning of that word in section 54(1). If you sell your house and make a profit, pay Caesar what is due to him. But if you buy or build another subject to the conditions of section 54(1) you are exempt. The purpose is plain; the symmetry is simple, the language is plain. Why multilate the meaning by lexical legalism. We see no stress in section on "cash and carry". The point pressed must, therefore, be negatived." 23.2 It is true that this decision is regarding the purchase of existing property viz., the purchase of 3 joint owners' share in a common house by paying to each Rs. 30,000 as against a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viser under a will) had no interest in the property. Savadhar Chandra Day v. Tara Sundari Dari AIR 1962 SC 438. 25.2 Allot in Law Lexicon is: 'To divide or distribute, as by lot; to apportion or distribute or parcel out (as); to allot shares in a public company; to grant; to assign; set apart; appropriate; (as), to allot a sum of money for some specific purpose.' 'To allot is to indicate that a portion of property held by a number of joint owners is in future to belong exclusively to a specific person called the "allottee".' Allotment: The act of allotting or distribution by lot. That which is allotted; a share, or portion granted or distributed; the thing or portion which is assigned by lot. "In company law 'allotment', the Supreme Court held in Sri Gopal Jalan Co.'s case, means the appropriation out of the previously unappropriated capital of a company, of a certain number of shares to a person." 25.3 'The expression "sale of goods" in entry 48, as observed in State of Madras v. Gannon Dunkerley Co. AIR 1958 SC 560, is a nomen juris, its essential ingredients being an agreement to sell movables for a price and property passing therein pursuant to that agreement'. In Andhra Sujarb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s where no consideration passes for the transfer of goods it would not be a case of purchase and that would be a simple case of acquisition, but when acquisition of property is with monetary consideration it would be a case of purchase. 26. On a close reading of the meanings of these terms it becomes evident that acquisition is getting by self exertion or by change of ownership of something, the allotment is apportioning a previously unapportioned capital of a company. When the acquisition by allotment is for a consideration it is a sale. Therefore when a price is paid for allotment of shares it is a purchase of shares in general law as well as for the purposes of Explanation to section 73 of the Act. 27. We may examine this issue from a different angle. What the Explanation provide is the any business of a company consists of purchase and sales of shares of another company, therefore, we have to see is whether business is of purchase and sale of shares and not what is the nature and mode of such purchase. The assessee does not dispute that on allotment shares are acquired. He only disputes that they are not purchases. When acquisition is with a price it is a purchase as held in T. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d purchase of shares. If it is found that any part of the business of the company consists in the purchase and sale of shares, then for the purpose of section 75 such a company shall be deemed to be carrying on a speculation business to the extent the business consisted of purchase and sale of shares. It is not the requirement of the section that both purchase and sale of shares should take place in the same year. But what the section requires is that there will be business of sale and purchase of shares and the assessee-company will carry on that business in the relevant year of account. The very fact that shares were valued as stock-in-trade and the loss was disclosed, as a result of the valuation of the shares, goes to show that the business of share purchase and sale of shares was carried on by the company. To the extent such business was carried on, the business of the assessee-company must be treated as speculation business." 28.2 Quoting this paragraph of the judgment of the Calcutta High Court, the Mumbai Bench of the Tribunal in the case of Akrosh Investment Leasing (P.) Ltd. order observed as under: "This decision squarely applies to the facts of the assessee's case befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lts of that period, and can in no sense be regarded as source of such profits (or losses)". In this view of the matter, the loss on valuation of closing stock of shares, in the present case, cannot be treated any different than a normal trading loss; such loss is, as is the settled legal position, an integral part of the loss on trading, i.e., purchase and sale, of shares. 18. Accordingly, in our considered view, the proposition advanced by the learned counsel is neither supported by admitted factual position or the settled legal principles. For these reasons, we reject the alternate contention also." 28.4 In the case of Prudential Construction Co. Ltd., the Hyderabad Bench of the Tribunal observed as under: "12. One of the arguments advanced by the learned counsel is that the loss relating to purchase and sale of shares can, at the most, be treated as speculation loss and not in the loss resulting in on account of valuation of closing stock. We do not agree with such proposition. As mentioned earlier, the appellant is carrying on business of trading in shares. Where the appellant is carrying on business of purchase and sale of shares, the value of opening stock and the closing sto ..... X X X X Extracts X X X X X X X X Extracts X X X X
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