If assessee is not engaged in the business of shares dealing, loss from shares dealing cannot be deemed to be from speculation under Explanation to Sec 73 of Income Tax Act.

Case: CIT Vs Orient Instrument Pvt Ltd (Delhi High Court)

Facts:  The assessee was primarily engaged in the business of trading of crafts paper. The assessee also purchased and sold some shares for which he claimed a loss of Rs. 5.53 Lakhs.

AO held that under the Explanation to Sec 73, the said loss of shares was deemed to be arising from speculative transactions and thus cannot be allowed to be set off against business profits.

The CIT(A) and Tribunal allowed the assessee claim by holding that the assessee was not engaged in the “business” of purchase and sale of shares and therefore exp to sec 73 does not apply.

Department appealed before the High Court and argued that even a single transaction of sale or purchase of shares might amount to a “business”

 

HELD by the High Court in favour of assessee:

 

·         The assessee was engaged in the business of trading of crafts paper, installation, job work, consultancy and commission.

·         By all means, transaction whereby it purchased shares and incurred losses on account of the fall in value of share was a solitary one.

·         Findings of Tribunal that transaction did not constitute business carried on by company, cannot be termed as perverse or unreasonable.

·         In circumstances, the court is satisfied that no substantial question or law arises. Appeal was accordingly dismissed

 

CA Rahul Jain

rahuljain@rpmd.in