KALYAN JYOTI SENGUPTA, J. - (1.) "(i) Whether in interpreting scope and meaning of the Explanation to s. 73 of the Act the statutory fiction introduced for treating the loss arising from the business of purchasing and selling of shares as loss from speculation business is confined and restricted only for the purpose of s. 73 of the Act and whether the said fiction which is specifically created for the particular purpose can be extended or applied to other provisions of the Act when the Parliament itself in clear and unambiguous terms restricted the portion of the said Explanation to s. 73 ? (ii) Whether in a case as in the present one, the transaction arising from the business of purchasing and selling of shares does not come within the ambit and scope of s. 43(5) of the Act defining speculative transaction, the loss arising from the purchase and sale of shares can be treated as loss from speculation business applying Explanation to s. 73 of the Act and not sustain claim of for set off of such loss under ss. 70, 71 and 72 of the Act ? (iii) Whether the loss arising from the decrease in value of shares which are held as stock -in -trade of the assessee can be treated as a loss of speculation business within the meaning of Explanation to s. 73 of the Act - appeal bearing No. ITA 313/Cal/1998 relating to the asst. yr. 1994 -95 the above appeal was preferred by the assessee.
(2.) BRIEFLY stated facts are as follows : The assessee is a public limited company within the meaning of the Companies Act, 1956. During the asst. yr. 1994 -95 the assessee company was engaged in manufacturing of cooling towers and in the business of selling and purchasing shares. The gross total income of the assessee company is chargeable under the heads 'Profits and gains of business or profession', 'Capital gains' and 'Income from other sources'. The petitioner has filed return showing income under the head 'Profits and gains of business or profession' of Rs. 17,57,23,061 and the income from other sources of Rs. 80,60,646 for the asst. yr. 1994 -95. During the assessment year the amount of loss of Rs. 1,41,60,772 arising out of the purchase and sale of shares as stock -in -trade at the end of previous year relevant to the asst. yr. 1994 -95 was not allowed to be set off against the profit from business under s. 70 of the Act, by treating said loss arising from speculation business within the meaning of Explanation to s. 73 of the Act. The appellant before us against the aforesaid decision of the AO preferred appeal. The first appellate authority while affirming the decision of the AO has additionally held that on plain reading of relevant provision the case of the appellant falls within the ambit of Explanation to s. 73 of the Act and, therefore, loss of Rs. 141.61 lakhs sustained in share dealing has to be treated as deemed speculation loss which cannot be allowed to be set off against the other income of the appellant.
(3.) BEING aggrieved by the CIT(A) the appellant approached the learned Tribunal who has affirmed the said decision of two authorities with detailed reasons. Dr. Pal, learned senior advocate appearing for the assessee while assailing the said judgment and order submits that all these authorities erred in disallowing set off applying the Explanation of s. 73 of the IT Act, 1961. On fact there is no finding nor any allegation that the purchase and sale of shares were not effected by physical and actual delivery of shares. Hence, it will not be treated as a speculative transaction within the meaning of s. 43(5) of the Act. It is nobody case that purchase and sale of shares resulting in loss has been manipulated with the object and device of creating certain artificial losses in order to reduce profits of the business of the assessee. Hence the loss arising from the said business of the assessee is to be treated as its business loss and should be set off under s. 70 of the Act under the same head of income. If entire loss is not so set off under s. 70 it shall be set off against the other heads of income under s. 71 and if there is any balance of the loss which cannot be so set off under ss. 70 and 71, it will be allowed to be set off and carried forward under s. 72 of the Act and in this way such carry forward is to be made in succeeding years.;