TMI Blog2003 (8) TMI 169X X X X Extracts X X X X X X X X Extracts X X X X ..... elete the disallowance of Rs. 13,967 from misc. expenses being penalty charges. 3. Broadly stated, the facts of the case in brief are, that the assessee filed return on 9th Dec., 1998, showing total income of Rs. 14,44,570 which was processed under s. 143(1)(a) and the returned income was accepted. Thereafter, notices under ss. 143(2) and 142(1) were served on the assessee calling for certain details. In response to the notice the authorised representative for the assessee appeared from time to time and discussed the matter. The controversy arises in this case when the AO invoked provisions of Explanation to s. 73 of the IT Act, 1961, and thereby treating a business loss of Rs. 3,97,126 as speculative loss. 4. The learned Departmental R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rious constituents and issue contract notes to its constituents after adding/ subtracting to/from executed price of purchases/sales as the case may be, for its services and the difference between the payment made/received from National Stock Exchange and its constituents for the trades executed is credited in the accounts as brokerage of the constituents. It was further stated that there was no fixed rate of service charges and it varies from customer to customer and share script to share script. In effect, the income declared under the head 'brokerage' is nothing but the difference between the purchase price for the constituents and sale price to the constituents. It was also contended that apart from that in the course of business sometim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1996-97 of the assessee-company at p. 103, and also the bills, final receipt statement, etc., to substantiate the stand of the assessee. It was also contended that the members are the only parties to bargain and the stock exchange does not recognise as parties to any bargain in the market any parties other than its own members and the member is directly or primarily liable to every other member with whom he effects a bargain for its due fulfilment in accordance with the rules, bye-laws and regulations of the exchange whether such bargain be for account of the member effecting it or for account of a principal. The learned counsel contended that the learned CIT(A) is quite justified in directing the AO to delete the disallowance of Rs. 13,967 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstituents after placing the order did not honour their orders and such shares are to be shown by the assessee as its own purchase and sale and thereafter when the occasion arises these shares are sold/purchased in the market to square up the deal. The assessee in such business activity incurred some loss or some profits. We, therefore, agree with the learned CIT(A) that the profit and loss in share is part of the share brokering business and in course of the business activity, if there is any loss that is to be treated as outgoing from the brokerage income shown by the assessee. In this connection, we have noticed from the bills, sale and purchase statement, rules and regulations of Calcutta Stock Exchange and final receipt statement of Na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge and in view of the arguments/reasons adduced before us, we also agree with the learned CIT(A) that the Explanation to s. 73 is not applicable in the instant case and the share trading loss is to be set off from the income of the assessee and not to treat the same as speculation loss. 7. We have carefully gone through the audited P L a/c and the balance sheet placed at pp. 103 to 111 of the paper book and found that the assessee has shown net profit of Rs. 15.59 lakhs as per the P L a/c. The assessee has shown brokerage income of Rs. 49.17 lakhs, interest income of Rs. 1.66 lakhs and dividend income of Rs. 0.74 lakh. On the other hand, the assessee had suffered loss of share dealing amounting to Rs. 3.97 lakhs in respect of which AO has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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