I.T.O. 9(2)(3), MUMBAI vs. NATRAJ FINANCIAL & SERVICES PVT. LTD., MUMBAI

Order Under Section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER:

2. Brief facts of the case are that assessee is a private limited company and is in the business of investment and in dealing in shares and securities. Assessee-company filed its return of income for Assessment Year 2008- 09 on 29th September 2008 declaring nil income. The assessment was completed on 27th December 2010 under section 143(3). The Assessing Officer while passing the assessment order noted that the assessee has shown loss in share transaction of Rs. 57,77,584/- which is more than the income by way of brokerage interest, short-term capital gain, long-term capital gain and other income. Therefore, the gross total income of the assessee consist mainly of income which is chargeable under the head M/s Natraj Financial & Services Pvt. Ltd.

Capital Gain and Income from Other Sources was rejected by the Assessing Officer. The Assessing Officer treated the entire loss from purchase and sale of shares as ‘Speculation Loss’ and by invoking the Explanation in Section 73 of the Act not allowed the set off of loss from business income. On appeal before ld. Commissioner (Appeals), the assessee was allowed the set off of said loss by treating it as business loss and not speculative loss. Therefore, aggrieved by the order of ld. Commissioner (Appeals) the Revenue has filed the present appeal before this Tribunal. The Revenue has raised following grounds of appeal; (i) On the facts and in the circumstances of the case and in law, the learned Commissioner(Appeals) erred in not appreciating the correct working of taxable income worked by assessing officer as per explanation to section 73 where in speculation loss exceeds the income computed under the head other sources and capital gain. On the facts and in the circumstances of the case and in law, the learned Commissioner (Appeals), while giving relief under section 73, has wrongly considered addition of long-term capital loss of Rs. 63,38,617/- in computation of cross total income. (ii) The appellant prays that order of Commissioner (Appeals) on the ground be set aside and that of Assessing Officer be restored.

3. We have heard learned DR for the revenue and the learned AR for the assessee and perused the material available on record. The ld. DR for the revenue supported the order of the assessing officer. The ld DR further submits that the ld Commissioner (Appeals) without giving the opportunity to the assessing officer accepted the revise computation of income. The revised computation furnished by the assessee before ld Commissioner (Appeals) was different than the computation furnished during the assessment proceedings. No remand report was sought by ld Commissioner (Appeals) before accepting the fresh computation of income under different head. In support of his submissions the ld DR for - M/s Natraj Financial & Services Pvt. Ltd. the revenue relied on the decision of Tribunal in Yucca Finvest (P) Ltd Vs DCIT [2006] 101ITD 403(Mum). On the other hand the ld. AR for the assessee supported the order of ld. Commissioner (Appeals). The ld. AR for the assessee further submits that the ld. Commissioner (appeals) was satisfied with the computation of income furnished by assessee and that the comment of assessing officer was not required.

The Assessing Officer further noted the share trading business; the assessee has shown the dealing of shares in the following manner: Purchase of shares 50,86,48,965 Sale of shares 50,23,64,099 Loss (on account of 6,68,400 Closing stock 36,65,837 misappropriation of Investment) Expenses 17,27,289 Gross loss 57,77,584 Depn. as per I.T. Act. 7,62,866 51,18,07,520 51,18,07,520

assessee consist mainly income chargeable under the head ‘Income from Other Sources’ and Capital Gain’’. The assessee is also engaged in granting of loans and advances as its principle business, therefore, deeming fiction under section 73 of the Act is not applicable on the assessee. The contention of assessee was not accepted by Assessing Officer. The Assessing Officer treated the loss as speculation loss under deeming fiction in Explanation to section 73 and not allowed set off of against the business income.

profession. The income of assessee under the head Business Income is higher than the assessable income. Therefore, the deeming fiction in section 73 would not apply. The ld. Commissioner (Appeal) also concluded that the assessee-company is not a part of any group company and rather traded in share and security of all types of companies. The assessee earned Capital Gain of Rs. 18,80,793/- together with the Income from Other Sources at Rs. 34,40,775/-, which exceed the business loss of Rs. 48,41,946/-, therefore, the assessee is clearly covered by first exception in Explanation to section 73 and deleted the disallowance of loss. The ld. DR for the Revenue failed to bring any contrary material or law to our notice to take a contrary view. Therefore, we do not find any illegality or infirmity in the order passed by ld. Commissioner (Appeal). The contention of ld. DR for the Revenue is that no remand report was sought from Assessing Officer has no legal force, as no fresh evidence or additional evidence was furnished by the assessee. The assessee has explained the computation of income under different head of income which was appreciated and accepted by ld. Commissioner (Appeal). In the result, ground of appeal raised by Revenue is dismissed. The case law relied by ld. DR is not helpful to the revenue. As we have seen that the ld Commissioner (Appeals) has given clear findings that deeming fiction in section 73 is not applicable on the assessee.

7. In the result, appeal filed by Revenue is dismissed. Order pronounced in the open court on 22nd day of June 2018. Sd/- Sd/- (RAJESH KUMAR) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 22/06/2018 S.K.PS - M/s Natraj Financial & Services Pvt. Ltd.