Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “A” BENCH, AHMEDABAD
Before: SHRI WASEEM AHMED&
The instant appeal filed by the assessee is directed against the order dated 21.12.2015 passed by the Commissioner of Income Tax (Appeals)-10, Ahmedabad arising out of the order dated 30.01.2015 passed by the ACIT, Circle-1(3), Ahmedabad under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred as to “the Act”) for A.Y. 2012-13.
At the very onset of the proceeding the Ld. Counsel appearing for the assessee submitted before us that the issue is squarely covered in the assessee’s own case for A.Y. 2010-11 & 2013-14. A copy of the order passed by the Coordinate Bench in favour of the assessee has also been Edelweiss Broking Ltd. vs. ACIT Asst.Year –2012-13 - 2 - submitted before us. The Ld. DR has failed to controvert such submission made by the Ld. AR.
While deciding the issue of Saudafer Loss while allowing the appeal preferred by the assessee the Coordinate Bench has been pleased to observe as follows in for A.Y. 2010-11 which is reproduced hereinbelow:
70. Being aggrieved by the order of the Learned CIT (A) both the Revenue and the assessee are in appeal before us. The Revenue is in appeal against the deletion of the addition made by the AO for Rs.17,02,013/- treating such loss relating to future option segment which was carried out through the recognized stock exchange whereas the assessee is in appeal against the confirmation of the addition of Rs. 21,38,061/- which was treated by the Learned CIT (A) as speculative in nature in pursuance to the explanation to Section 73 of the Act. The ground No. 4 of appeal filed by the assessee in reads as under: “4. In law and in the facts and circumstances of the appellant’s case, the learned CIT(A) has grossly erred in sustaining the Ld. AO’s action of treating what was normal business los [Saudafer loss] as speculation loss to the extent of Rs. 21,38,061 [out of Rs. 38,40,074 so treated by the Ld. A.O.].
The Learned DR before us submitted that the loss claimed by the assessee for Rs. 17,02,013/- is deemed to be speculative loss under explanation to Section 73 of the Act.
On the other hand, the Learned AR before us reiterated the contention of the assessee as raised before the authorities below.
Both the Learned DR and the AR before us vehemently supported the order of the authorities below to the extent favourable to them.
We heard the rival contentions of both the parties and perused the materials available on record. The first issue that arises for our consideration is whether the impugned loss incurred by the assessee relates to the sale and purchase activities carried out by the assessee for itself or it relates to the other clients of the assessee. It is a question of fact which can verified based on the documentary evidence. Indeed, the assessee has not furnished the sufficient documentary evidence in support of his contention. But looking at the amount of impugned loss in comparison to the volume of the brokerage business carried out by the assessee, we find that such loss is of negligible value. Furthermore, the tax audit report in form 3CD suggests that the Edelweiss Broking Ltd. vs. ACIT Asst.Year –2012-13 - 3 - assessee is engaged in the activity of stockbroking only and not in the activity of sale purchase of securities. The copy of form 3 CD is placed on pages 133 to 165 of the Paper Book. Similarly, the AO has also recorded in his order the nature of business of the assessee i.e. stockbroking. Even in the earlier Assessment Year 2006-07, the impugned loss was also treated as speculative in nature but the Learned CIT (A) deleted the same as the assessee was able to justify his contention based on the documentary evidence that such loss relates to its clients. This finding of the Ld. CIT- A, if analyzed in aggregation of other facts i.e. form 3CD report, profit & loss account, nature of the business as recorded by the AO, the fact emerges that that the assessee is not carrying out share trading activities in its accounts.
On perusal of the financial statements placed on pages 59 to 132 of the Paper Book, it was observed that there was no transaction shown by the assessee as purchase and sale of the shares. In view of the above and after considering the details as discussed above we hold that the impugned loss incurred by the assessee does not pertain to its accounts rather it relates to the accounts of its clients. Accordingly, we conclude that the provisions of explanation to Section 73 of the Act cannot be applied to the case on hand. In holding so we find support and guidance from the order of this Tribunal in the case of Parker securities Ltd versus DCIT reported in 102 TTJ 235 wherein it was held as under: “Explanation to Section 73 provides that where any part of the business of a company (other than certain specified companies as mentioned in the Explanation) consists in the purchase and sale of shares of other companies, such company shall, for the purposes of this Section, be deemed to be carrying on a speculation business to the extent to which the business consists of the purchase and sale of such shares. It is clear from the said provision that sale and purchase of shares of other companies, within the ambit of the Explanation, must be carried out as an activity of business. The term ‘business’ has been defined in Section 2(13). Noting the definition of ‘business’ from the view point of Explanation to Section 73, it has been observed by the Karnataka High Court in the case of Mysore Rolling Mills (P.) Ltd. v. CIT [1992] 195 ITR 404/ 63 Taxman 416 that any kind of venture would not fall within this inclusive definition. The venture or the adventure will have to be in the nature of trade, commerce or manufacture. Basically, the concept of business involves a frequent activity of a particular nature. Therefore, to find out that the assessee carried on purchase and sale of shares of other companies as its business in a given case, the facts of that case will have to be examined and the tests which could determine such situation are - (i) nature of assessee’s business in general, (ii) the purpose behind the particular transaction, and (iii) the effect of the transaction etc. In the instant case, the nature of the assessee’s business in general was to earn income as a broker of stock exchange and the purpose behind the transactions in regard to which the assessee had incurred loss was the purchase for and on behalf of certain clients to earn brokerage income therefrom. It was only an eventuality that some of the clients disowned only part of the transactions which under compulsion were to be taken by the assessee as its own. [Para 28]”
Edelweiss Broking Ltd. vs. ACIT Asst.Year –2012-13 - 4 -
75.1 In view of the above, once it has been held that loss does not relate to the activity of sale/purchase of shares by the assessee for itself, then the provisions of explanation to Section 73 of the Act cannot be applied. Hence, the ground of appeal of the Revenue is dismissed whereas the ground of appeal of the assessee is allowed.”
In the absence of contrary situation we do not find any reason to deviate such stand taken by the Coordinate Bench and thus respectfully relying upon the observation made therein we delete the impugned amount of loss treating the same as business loss and not a speculation loss and allow this ground of appeal preferred by the assessee.