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Income Tax Appellate Tribunal, “D” BENCH: KOLKATA
Before: Shri M. Balaganesh, AM & Shri S. S. Viswanethra Ravi, JM]
ORDER Per Shri M. Balaganesh, AM:
This appeal by assessee is arising out of order of CIT(A)-2, Kolkata vide appeal No. 1072/CIT(A)-2/14-15 dated 18.07.2016. Assessment was framed by ITO, Wd-5(3), Kolkata u/s. 143(3) of the Income tax Act, 1961 (hereinafter referred to as the “Act”) for AY 2010- 11 vide his order dated 16.03.2013.
The only issue to be decided in this appeal is as to whether the loss incurred by the assessee on sale of shares would fall under the ambit of Explanation to section 73 of the Act in the facts and circumstances of the case.
2.1. The brief facts of this issue is that the assessee is engaged in the business of share trading and financial business. The Ld. AO observed that in the P&L Account of the assessee the assessee has shown sales and purchase of shares at Rs.20,78,750/- and Rs.23,85,000/- respectively. There was no opening or closing stock. The loss incurred thereon amounting to Rs.3,06,250/- arising from share trading was claimed as regular business loss by the assessee which the AO sought to treat the same as speculation loss by 2 Response Investments Ltd., AY 2010-11 invoking the provisions of Explanation to section 73 of the Act. The assessee explained that this composition of income consists of income from business, income from other sources and income from capital gains and such income is much more than the loss arising from share trading and accordingly, pleaded that the assessee’s case falls under the first limb of the exception provided in Explanation to section 73 of the Act. The AO however, not convinced with this reply sought to treat the said loss as speculation loss which was also confirmed by the Ld. CIT() in first appeal. Aggrieved, the assessee is in appeal before us on the following grounds:
“1. For that the order of the Ld. CIT(A) is arbitrary, illegal and bad in law. 2. For that the Ld. CIT(A) erred in treating the loss of Rs.3,06,250/- from purchase and sale of shares during the year as speculation loss by invoking Explanation to Sec. 73 when the assessee’s case fell within the exceptions provided u/s. 73. 3. For that on the facts and circumstances of the case the order of the CIT(A) be modified and the assessee be given the relief prayed for.”
2.2. The ld AR placed on record the copy of computation of total income together with the Balance Sheet to prove that the income from other sources comprising of interest income itself was Rs.5,61,045/- which was much more than the alleged speculation loss in Rs.3,06,250/- arising out of loss on sale of shares. He placed reliance on the decision of Hon’ble Calcutta High Court in the case of Middleton Investment & Trading Co. Ltd. in of 1999 dated 15.01.2014. In response to this, the Ld. DR vehemently relied on the orders of the lower authorities.
2.3. We have heard rival submissions and gone through the facts and circumstances of the case. We find from the computation of total income of the assessee that the interest income derived by the assessee offered to tax under the head income from other sources was Rs.5,61,045/- which is much more than the loss on sale of shares of Rs.3,06,250/-. Hence, we are inclined to agree with the argument of the Ld. AR that the assessee’s case squarely falls under the first limb of the exception provided in Explanation to Sec. 73 of the Act. We also find that the Hon’ble Calcutta High Court in the case of Middleton Investment & Trading Co. Ltd., supra supports the case of the assessee. Accordingly, the loss on sale of 3 Response Investments Ltd., AY 2010-11 shares of Rs.3,06,250/- is hereby directed to be treated as regular business loss. Accordingly, the ground raised by the assessee is allowed.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 14.12.2016