INCOME TAX OFFICER Vs. EASTERN AVIATION AND INDUSTRIES LTD
LAWS(IT)-1989-2-15
INCOME TAX APPELLATE TRIBUNAL
Decided on February 06,1989

Appellant
VERSUS
Respondents

JUDGEMENT

Y. Upadhyay, Vice-President - (1.)IN this Departmental appeal, the following ground has been taken :
That on the facts and in the circumstances of the case, the learned Commissioner of INcome-tax (Appeals) erred both in law and on facts in directing that the speculation losses are to be treated as ordinary business losses.

(2.)The assessee, is a limited company and derives income from share dealings and dividend. The assessee during the year under appeal disclosed share loss of Rs. 12,90,145 for which delivery was taken by it. The speculative loss was shown at Rs. 7,95,447. The Income Tax Officer discussed the nature of the business of the assessee and indicated that it was a dealer in shares and it was not an investor. He, accordingly, came to the conclusion that the business loss shown by the assessee at Rs. 12,90,145 could be taken as speculative loss in view of Explanation to Section 73 of the Income-tax Act, 1961.
The assessee went in appeal before the Commissioner of Income-tax (Appeals) and contended that it was an 'Investment Company' within the meaning of Section 109(ii) of the Act and indicated that its dividend income was greater than the business income. Therefore, it was an 'investment company' and, consequently, the business, loss in shares could not be taken as speculative loss in view of Explanation to Section 73 of the Act. The argument of the assessee was accepted by the CIT(A) who directed the ITO to treat the loss from share dealings as an ordinary business loss and not as a speculative loss.

(3.)SHRI S. C. Sen, Senior Departmental Representative, stated the facts and urged that the finding given by the CIT(A), on the facts of the case, is not fair. He pointed out that the assessee was a dealer in shares and. it suffered loss during the year under consideration. The loss incurred by the assessee was of two types : one in share dealing and the other in speculation. The total loss shown by the assessee is roughly Rs. 20,85,592. Dividend was received by the assessee at Rs. 3,87,603. The loss and income are two faces of the same transaction and, therefore, once the loss is greater than the income from dividend the assessee is not an 'investment company' within the meaning of Section 109(ii) of the Act. SHRI Sen, accordingly, urged that the finding of the CIT(A) should be reversed.


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