INCOME TAX OFFICER WARD-4(4), KOLKATA vs. M/S PAWAN INDUSTRIAL CORPORATION PVT. LTD., KOLKATA

On appeal by the Assessee, the CIT(A) held that interest income and dividend income was to be assessed under the head “Income from other sources”. As a consequence the deeming provisions of Explanation to Sec.73 of the Act became inapplicable to the share trading loss incurred by the Assessee. Consequently the income of the Assessee was determined by setting off the loss from share trading against interest income and dividend income. The AO had disallowed Proportionate expenses of Rs.1,34,514/- attributable to trading in shares. This addition was also deleted by CIT(A) for the reason that share trading loss was considered as a normal loss and not speculative loss.

Aggrieved by the order of the CIT(A), the revenue has preferred the present appeal before the Tribunal. ITA No.2160/Kol/2013-M/s.Pawan Industrial Corporation Ltd.A.Y.2004-05

We have heard the submissions of the learned DR who relied on the order of the AO. The learned counsel for the Assessee relied on the order of the CIT(A) and further submitted that even assuming that the interest income and dividend income have to be considered as business income, the share trading loss and income from interest on loans and advances and dividend income have to be adjusted first to arrive at the income under the head income from business before applying the provisions of explanation to Sec.73 of the Act. If that is done then the income from business would be only Rs.2,02,289/-, as per the following computation: Income from business (interest on loans and advances & dividend income) Rs.43,00,951 Less: share trading loss Rs.45,03,270 Rs.2,02,289 The income under the head “Income from House Property” was Rs.2,80,240/- which is much higher than the income under the head “Income from business”. Therefore the Explanation to sec.73 of the Act will not be attracted and the relief given by the CIT(A) has to be sustained. In this regard he relied on the decision of the Hon’ble Calcutta High Court in the case of CIT Vs. Middleton Investments & Trading Co.Ltd. ITA No. 196 of 1999 dated 15.1.2014.

We have given a careful consideration to the rival submissions. The Hon’ble Calcutta High Court in the case of Middleton Investment & Trading Co. Ltd. (supra) had to deal with a case where the income of an Assessee from business of granting loans and advances was Rs.2,10,218/-, Short term capital gain on sale of shares Rs.6,425 and income from other sources of Rs.10,13,798. The Assessee incurred a loss of Rs.10,83,091 in share trading. The Assessee contended that its income from business was Rs.8,72,972 after adjusting loss of Rs.10,83,091 in share trading and income from business of Rs.2,10,218/- and since income from other sources was more than income under the head income from business, explanation to Sec.73 will not be ITA No.2160/Kol/2013-M/s.Pawan Industrial Corporation Ltd.A.Y.2004-05

We are of the view that in the light of the aforesaid decision of the Hon’ble Bombay High Court, the order of the CIT(A) has to be upheld and even assuming the interest income and dividend income has to be held to be one from business, still the set off as done by the Assessee has to be allowed and it is only thereafter that the applicability of exception to Explantion to Section 73 of the Act, have to be explored. In the light of the above conclusion, we find no merit in the appeal by the Revenue.

In the result, appeal by the revenue is dismissed.