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Income Tax Appellate Tribunal, “A”, BENCH MUMBAI
Before: SHRI R.C.SHARMA, AM & SHRI PAWAN SINGH, JM
O R D E R PER R.C.SHARMA (A.M): This is an appeal filed by the assessee against the order of CIT(A), Mumbai, dated 20-10-2011, for the assessment year 2003-04, in the matter of order passed u/s.143(3) of the I.T.Act, on the following grounds:- 1) In the facts and circumstances of the case and in law, the Assessing Officer erred in treating loss of Rs 13,05,973/- in respect of share trading activities as speculation loss and thereby disallowing set off of the same against income from brokerage etc. 2) In the facts and circumstances of the case and in law, the Assessing Officer erred in treating expenses of Rs 2,38,455/- attributable to share trading activities as speculation loss and thereby disallowing set off of the same against income from brokerage etc. 3) In the facts and circumstances of the case and in law, the Assessing Officer erred in disallowing professional charges of Rs.6,40,000/- paid to director without any comparable case or without any justification.
2 4) In the facts and circumstances of the case and in law, the Ld Commissioner of Income Tax (A) also erred in confirming above additions.
Rival contentions have been heard and record perused. Facts in brief are that the assessee is a share broker and member of Stock Exchange Mumbai and accordingly carried out business of shares and securities broking. During the course of assessment the AO disallowed assesse’s claim for set off of share loss arising out of purchase and sale of shares by treating same as speculation loss under Explanation to Section 73. By the impugned order CIT(A) confirmed the action of AO against which assessee is in appeal before us.
We have considered rival contentions and found that assessee was having income from business and also income from other sources in the form of dividend income. As the assessee was having business loss out of purchase of sale and shares more than the income from other sources the AO disallowed assessee’s claim for set off of such loss by invoking provisions of Explanation to Section 73 of I.T.Act.
By the impugned order the CIT(A) confirmed the action of AO by observing as under :- “The assessee traded on its own account in certain shares. It is also not disputed that the appellant is neither a company engaged in business of giving loans and advances as banking company or as NBFC and hence it is not excluded from the purview of explanation to Section 73 of the Act. The assessee’s P&L Account shows that it had earned income from dividend of Rs.7,81,182/- but the same was offered as business income. The AO has discussed that the appellant’s management of various expenses was just to reduce the business income in such a way that it is less than the dividend income. This was as argued by the AO, done in order to save the assessee’s case from the provision of Explanation to Section 73 of the Act. Whether explanation to Section 73 is applicable in the present case or not, the available judgements of the Tribunal in the 3 case of Aman Portfolio (P) Ltd. vs DCIT (supra) and HSBC Securities & Capital Market (I) Pvt. Ltd. Vs JCIT(supra) and also in the case of DCIT vs Frontline Capital Services L td (2005) 96 TTJ (Del) 201 have to be considered. It is noticed that the judgment of Tribunal in the case of Aman Portfolio (P) Ltd. vs DCIT (supra) was over ruled in the case of DCIT vs Frontline Capital Services Ltd (supra) and this judgement of Delhi Bench of Tribunal in the case (supra), was neither cited before the Bench in the case of HSBC Securities & Capital Market (I) Pvt. Ltd. Vs JCIT(supra), nor was perhaps available because the decision in the case of DCIT vs Frontline Capital Services L td (supra) is dated 30th June 2005 whereas the Tribunal's judgement in the case of HSBC Securities & Capital Market (I) Pvt: Ltd. Vs JCIT(supra) is dated 14.07.2005. Therefore the judgment of jurisdictional ITA T in the case of KNC Shares & Securities (P) L td as per ITkNo.7420/6782/M/03 dated 22.08.2006 is very relevant because the said judgement has considered the case of HSBC Securities & Capital Market (I) Pvt. Ltd. Vs JCIT(supra) and also the case of Aman Portfolio (P) Ltd. vs DCIT (supra) and also the case of DCIT vs Frontline Capital Services L td (supra) and after considering all these judgements it was held by the Hon'ble Tribunal in the case of KNC Shares & Securities (P) Ltd(supra) that set off of loss arising from purchase and sale of shares should not be allowed against income from brokerage. The ITAT relied upon various judgement in the support of contention that explanation to Section 73 was applicable under these circumstances. Respectfully following the decision of Tribunal in the case of KNC Shares & Securities (P) Ltd vs ACIT (supra). The action of the LAO in treating the amount of Rs.13,05,193/- as speculation business loss is confirmed. There is no element of speculation in the commission income received by the appellant and where such appellant sustains any loss from his own speculation business, then such commission cannot be reduced from speculation loss. Reliance is placed on the Hon'ble Apex Court decision in the case of CIT vs Pangal Vithal Nayak & Co. Pvt Ltd (1969) 74 ITR 754 (SC). Grounds of appeal
No.2, is therefore dismissed.” Against the above order assessee is in further appeal before us.
5. Ld. AR relied on the decision of Hon’ble Bombay High Court in the case of Darshan Securities Pvt. Ltd., 341 ITR 556 and contended that assessee is covered by exception having income from other sources more than business income.
6. We have considered the ratio laid down by the Hon’ble High Court in the case of Darshan Securities Pvt. Ltd. (supra), wherein assessee’s 4 claim for share trading loss was allowed to be set off on the plea that assessee was having income from other sources more than the income from business. We found that in this case, the assessee was having net business income of Rs.2 lakhs as against which assessee was having income from dividend amounting to Rs.4.7 lakhs which is apparently more than the business income. Therefore, the Hon’ble High Court held that Explanation to Section 73 is not attracted. However, in the instant case before us, business income is more than the dividend income. Accordingly, we do not find any infirmity in the order of lower authorities for invoking Explanation to Section 73 for disallowing loss arose out of share trading.
In the result, appeal of the assessee is dismissed. Order pronounced in the open court on this 28/03/2016.
Sd/- Sd/- (PAWAN SINGH) (R.C.SHARMA) न्यानयक सदस्य / JUDICIAL MEMBER ऱेखा सदस्य / ACCOUNTANT MEMBER भुंफई Mumbai; ददनांक Dated 28/03/2016 प्र.कु.मभ/pkm, नन.स/ PS आदेश की प्रनिलऱपप अग्रेपषि/Copy of the Order forwarded to : अऩीराथी / The Appellant 1. प्रत्मथी / The Respondent. 2. आमकय आमुक्त(अऩीर) / The CIT(A), Mumbai. 3. आमकय आमुक्त / CIT 4. ववबागीम प्रनतननधध, आमकय अऩीरीम अधधकयण, भुंफई / DR, ITAT, Mumbai 5. गार्ा पाईर / Guard file. 6. सत्मावऩत प्रनत //True Copy// आदेशाि सार/ BY ORDER,