VINAMRA UNIVERSAL TRADERS P.LTD, MUMBAI V. DCIT CIR 7(3), MUMBAI

ITA 3256/MUM/2012

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1772 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 7 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 26-12-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 10-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S D MISTRY
• Keywords: Business income; Business expenditure; Speculation loss
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH F, MUMBAI BEFORE SHRI B.R. BASKARAN, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ITA NO.3256/M/2012 ASSESSMENT YEAR: 2008-09 M/S. VINAMRA UNIVERSAL TRADERS PVT. LTD., JAI CENTRE, 1 ST FLOOR, 34 P.D MELLO ROAD, OPP: RED GATE, MUMBAI 400 009 PAN: AACCV5090J VS. DY. COMMISSIONER OF INCOME TAX, CIRCLE-7(3), MUMBAI - 400020 (APPELLANT) (RESPONDENT) ITA NO.3680/M/2012 ASSESSMENT YEAR: 2008-09 ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE-7(3), ROOM NO.615, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 VS. M/S. VINAMRA UNIVERSAL TRADERS PVT. LTD., JAI CENTRE, 1 ST FLOOR, 34 P.D MELLO ROAD, OPP: RED GATE, MUMBAI 400 009 PAN: AACCV5090J (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI S.D. MISTRY, A.R. REVENUE BY : SHRI G.M. DOSS, D.R. DATE OF HEARING : 29.10.2015 DATE OF PRONOUNCEMENT : 31.12.2015 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE ABOVE TITLED CROSS APPEALS ONE BY THE ASSESSEE AND THE OTHER BY THE REVENUE HAVE BEEN PREFERRED AGAINST THE COMMON ORDE R DATED 05.03.2012 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFT ER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT YEAR 2008-09. THE S AME WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. 2. FIRST WE TAKE UP THE ASSESSEES APPEAL I.E. ITA NO.3256/M/2012. ITA NO.3256/M/2012 ITA NO.3680/M/2012 M/S. VINAMRA UNIVERSAL TRADERS PVT. LTD. 2 ITA NO.3256/M/2012 (ASSESSEES APPEAL) 3. THE ASSESSEE IN ITS APPEAL HAS AGITATED THE ACTI ON OF THE LOWER AUTHORITIES IN TREATING THE PROFIT ON SALE OF SHARES AMOUNTING TO RS.8,69,17,308/- AS BUSINESS INCOME AS AGAINST THE CAPITAL GAINS TREATE D BY THE ASSESSEE IN THE RETURN OF INCOME. THE ASSESSING OFFICER (HEREINAFT ER REFERRED TO AS THE AO) DURING THE ASSESSMENT PROCEEDINGS OBSERVED THAT THE ASSESSEE HAD SHOWN PURCHASE/SALE TRANSACTIONS OF SHARES IN 10 LISTED C OMPANIES AND HAD ALSO SHOWN INVESTMENT IN MUTUAL FUND UNITS. SOME OF THE SHARE S IN RESPECT OF THE SAID 10 COMPANIES WERE SOLD DURING THE YEAR AND THE ASSESSE E HAD RETURNED THE PROFITS EARNED AS SHORT TERM CAPITAL GAINS. THE AO TREATED THE ABOVE STATED INCOME FROM THE FROM THE SALE AND PURCHASE TRANSACTIONS OF SHARES AS BUSINESS INCOME OF THE ASSESSEE OBSERVING THAT IN ALL THE SCRIPTS, HOLDING PERIOD WAS NOT SUBSTANTIAL AND FURTHER THAT THE ASSESSEE HAD TAKEN HUGE BORROWINGS FOR MAKING INVESTMENT IN SHARES. HE THEREFORE OBSERVED THAT T HE OBJECTIVE OF THE ASSESSEE WAS TO CARRY OUT TRADING IN SHARES. HE THEREFORE T REATED THE INCOME OF THE ASSESSEE FROM SHARE TRANSACTIONS AS BUSINESS INCOME OF THE ASSESSEE. BEING AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREF ERRED APPEAL BEFORE THE LD. CIT(A). 4. THE LD. CIT(A) CONFIRMED THE ABOVE FINDINGS OF T HE AO. BEING AGGRIEVED, THE ASSESSEE HAS COME IN APPEAL BEFORE U S. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND HAVE ALS O GONE THROUGH THE RECORDS. THE LD. A.R. OF THE ASSESSEE HAS BROUGHT O UR ATTENTION TO PAGE 3 OF THE PAPER BOOK WHICH IS SCHEDULED FORMING THE PART OF T HE BALANCE SHEET WHEREIN THE ASSESSEE HAS SHOWN THE SHARES OF THE ABOVE STAT ED COMPANIES AS INVESTMENTS. THE LD. A.R. OF THE ASSESSEE HAS FURT HER BROUGHT OUR ATTENTION TO PAGES 4 TO 9 OF THE PAPER BOOK TO SHOW THAT THE ASS ESSEE HAS BEEN MAINTAINING TWO SEPARATE PORTFOLIOS I.E. INVESTMENT PORTFOLIO A ND TRADING PORTFOLIO. HE HAS FURTHER STATED THAT FROM THE VERY BEGINNING, THE IN TENTION OF THE ASSESSEE WAS TO HOLD THE SHARES OF THE ABOVE STATED COMPANIES AS IN VESTMENTS. WHEREAS THE ITA NO.3256/M/2012 ITA NO.3680/M/2012 M/S. VINAMRA UNIVERSAL TRADERS PVT. LTD. 3 ASSESSEE HAD ALSO HELD SHARES OF VARIOUS COMPANIES AS STOCK IN TRADE IN RELATION TO WHICH THE ASSESSEE HAD RETURNED THE INCOME AS BU SINESS INCOME. THE LD. A.R. OF THE ASSESSEE HAS FURTHER BROUGHT OUR ATTENT ION TO PAGE 10 OF THE PAPER BOOK WHICH IS A CHART SHOWING THAT EVEN IN THE SUBS EQUENT YEARS THE AO HAS TREATED THE SHARES OF THESE COMPANIES AS INVESTMENT S. HE HAS FURTHER SUBMITTED THAT THIS WAS THE FIRST YEAR OF THE INCORPORATION O F THE COMPANY AS THE COMPANY WAS INCORPORATED ON 17.07.2007. HE HAS FURTHER SUB MITTED THAT THERE WERE NO COMMON SHARES/COMPANIES IN THE INVESTMENT PORTFOLIO AND TRADING PORTFOLIO. THE COMPANIES, SHARES OF WHICH WERE KEPT IN INVESTM ENT PORTFOLIO WERE NOT THERE IN LIST OF TRADING PORTFOLIO AND VICE VERSA . HE HAS FURTHER SUBMITTED THAT EVEN THE ASSESSEE IN THE SUBSEQUENT YEARS HAD INCUR RED LOSS IN THE SHARE TRANSACTIONS RELATING TO THE INVESTMENT PORTFOLIO B UT THE SAME WAS NOT CLAIMED AS BUSINESS LOSS. THE ASSESSEE HAS CONSISTENTLY BE EN MAINTAINING ITS STAND FROM THE VERY BEGINNING AND EVEN THE CLAIM OF THE ASSESS EE OF LONG TERM CAPITAL LOSS HAS BEEN ACCEPTED BY THE AO IN ASSESSMENT YEAR 2011 -12. THE LD. D.R., ON THE OTHER HAND, HAS RELIED UPON TH E FINDINGS OF THE LOWER AUTHORITIES. 6. AFTER CONSIDERING THE SUBMISSIONS OF THE LD. REP RESENTATIVES OF THE PARTIES, WE FIND THAT THE ASSESSEE HAS CONSISTENTLY BEEN IN THE SUBSEQUENT ASSESSMENT YEARS ALSO HAS GIVEN THE SAME TREATMENT TO THE SHARES KEPT IN INVESTMENT PORTFOLIO. THE VERY INTENTION OF THE AS SESSEE AT THE TIME OF PURCHASE WAS DECIPHERABLE FROM THE ACT AND CONDUCT OF THE AS SESSEE. THE ASSESSEE HAS MAINTAINED TWO PORTFOLIOS. THE PROFITS/LOSS INCURR ED IN RESPECT OF TRADING PORTFOLIO HAS BEEN TREATED AS BUSINESS INCOME WHERE AS IN RESPECT OF INVESTMENT PORTFOLIO, THE ASSESSEE HAS RETURNED THE INCOME/LOS S AS CAPITAL GAINS/LOSS. EVEN SUBSEQUENTLY, THE LONG TERM CAPITAL LOSS CLAIMED BY THE ASSESSEE IN RESPECT OF THE SAME SCRIPTS HAS BEEN ACCEPTED BY THE AO IN ASS ESSMENT ORDER FOR A.Y. 2011-12. THOUGH THE ASSESSEE HAD MADE THE INVESTME NTS BY USING BORROWED FUNDS ALSO BUT THAT ITSELF CANNOT BE A SOLE GROUND TO TREAT THE ASSESSEE AS A ITA NO.3256/M/2012 ITA NO.3680/M/2012 M/S. VINAMRA UNIVERSAL TRADERS PVT. LTD. 4 TRADER IN RESPECT OF THE SCRIPTS WHICH HAD BEEN KEP T IN THE INVESTMENT PORTFOLIO, ESPECIALLY WHEN THE ASSESSEE HAS CLEARLY BIFURCATED THE INVESTMENT PORTFOLIO AND TRADING PORTFOLIO AND HAS CONSISTENTLY MAINTAIN ED THE SAME. 7. IN VIEW OF THE ABOVE, THE PROFIT ON SHARE TRANSA CTIONS RELATING TO INVESTMENT PORTFOLIO OF THE ASSESSEE IS ORDERED TO BE TREATED AS CAPITAL GAINS AND NOT AS BUSINESS INCOME OF THE ASSESSEE. APPEAL OF THE ASSESSEE IS THEREFORE ALLOWED . 8. NOW COMING TO THE APPEAL OF THE REVENUE I.E. ITA NO.3680/M/2012. ITA NO.3680/M/2012 (REVENUES APPEAL) 9. THE REVENUE IN ITS APPEAL HAS AGITATED THE ACTIO N OF THE LD. CIT(A) IN HOLDING THAT THE EXPLANATION TO SECTION 73 OF THE A CT WOULD NOT BE ATTRACTED IN THE CASE OF THE ASSESSEE IN RELATION TO THE SHARE T RANSACTIONS WHICH WERE TREATED BY THE AO AS SPECULATIVE IN NATURE. THE AO NOTED TH AT THE ASSESSEE HAD CREDITED ITS PROFIT & LOSS ACCOUNT BY PROFIT ON DEA LING IN SHARES, SECURITIES AND DERIVATIVES AT RS.9,28,34,535/-. THE ASSESSEE DURI NG THE YEAR HAD SHOWN LOSS ON SHARES AT RS.221,38,13,206/-, WHICH HAD BEEN SET OFF AGAINST FUTURE AND OPTIONS INCOME. HE OBSERVED THAT SINCE THE ASSESSE E WAS A COMPANY, HENCE AS PER THE PROVISIONS OF EXPLANATION TO SECTION 73 OF THE ACT, ANY LOSS INCURRED IN SHARE TRADING WAS REQUIRED TO BE TREATED AS SPECULA TION LOSS AND THEREFORE COULD NOT BE SET OFF AGAINST ANY OTHER INCOME. HE ACCORD INGLY TREATED THE SAID LOSS AS SPECULATION LOSS AND DENIED ITS SET OFF FROM THE BUSINESS INCOME OF THE ASSESSEE FROM THE OTHER ACTIVITIES AND ADDED BACK T HE SAME TO THE TAXABLE INCOME OF THE ASSESSEE. HE ALSO OBSERVED THAT THE ASSESSEE COMPANY HAD INCURRED VARIOUS EXPENSES WHICH INCLUDED INTEREST O F RS.93.70 CRORES AND OTHER EXPENDITURE OF RS.3.25 CRORES. OUT OF THE SAID AMO UNT, THE AO TREATED THE AMOUNT OF RS.10 CRORES AS RELATING TO SHARE TRADING . HE THEREFORE INCREASED THE SHARE TRADING LOSS BY RS.10 CRORES AND TREATED THE TOTAL AMOUNT OF RS.2,31,38,30,206/- AS SPECULATION LOSS OF THE ASSE SSEE. ITA NO.3256/M/2012 ITA NO.3680/M/2012 M/S. VINAMRA UNIVERSAL TRADERS PVT. LTD. 5 10. THE LD. CIT(A) , HOWEVER, ALLOWED THE CLAIM OF THE ASSESSEE WHILE RELYING UPON THE VARIOUS CASE LAWS AND THEREAFTER C ONCLUDING AS UNDER: AS HELD IN THE CASE OF RAJAN ENTERPRISE (P)LTD 41 ITD 469 (MUMBAI)-PARA 9 IN DETERMINING THE INCOME - ONE HAS TO SET OFF THE LOSS AGAINST THE PROFITS OF OTHER SOURCES UNDER THE SAME HEAD UNDER SEC.70 A ND THEREAFTER AGAINST THE INCOME FROM OTHER HEAD U/S.71. IT IS ONLY THEN ONE HAS TO SEE WHETHER THE PROVISO TO SEC.73 WAS APPLICABLE OR NOT AS THE PROVISIONS COME INTO PLAY WHEN THE GROSS TOTAL INCOME IS COMPUTED FIRST. THE GROSS TOTAL INCOME AS PER RETURN OF INCOME IS A S UNDER: INCOME FROM BUSINESS (240838112) CAPITAL GAIN 86917308 INCOME FROM OTHER SOURCES 196673974 GROSS TOTAL INCOME 42753170 THE APPELLANTS' GTI WOULD AFTER THE OBSERVATIONS WO ULD BE AS UNDER: INCOME FROM BUSINESS AS PER RETURN OF INCOME (24,08 ,38,112) ADD: ADDITIONAL DISALLOWANCE U/S 14A 3,68,85,5 13 CAPITAL GAIN CONSIDERED AS BUSINESS 8,69,17,308 UNDISPUTED ADDITION U/S 94(7) 50,03, 62 6 INCOME FROM BUSINESS (11,20,31,661 (11,20,3 1,665) INCOME FROM OTHER SOURCE 19, 66, 73,974 GROSS TOTAL INCOME 8,46,42,309 ========== PERUSAL OF THE AFORESAID FACTS CLEARLY SHOWS THE GROSS TOTAL INCOME OF THE ASSESSEE AMOUNTING TO RS.8,46,42,309/- IS MA INLY ON INCOME FROM OTHER SOURCES OF RS.19,66,73,974/-. AS PER THE RATIO IN THE CASE OF RAJAN ENTERPRISES VS ITO IN ,TAT MUMBAI BENCH D & ACIT VS. CONCORD COMMERCIALS P.LTD 95 LTD 117 MUMBAI ( SPECIAL BENCH)- AND CIT VS.DARSHAN SECURIT IES (PVT) LTD ITA NO.2886 OF 2009 (MUM HC) DATED 2/2/12 FOR DETERMINI NG THE NATURE AND TRANSACTION OF SALE/PURCHASE IN THE CASE OF THE ASSESSEE - THE SAME IS TO BE DETERMINED WITH RESPECT TO GROSS TOTA L INCOME OF THE ASSESSEE WITHOUT APPLYING THE PROVISIONS OF EXPLANA TION TO SEC.73. GROSS TOTAL INCOME OF THE APPELLANT WHICH IS RS.8,4 6,42,309/- AS DISCUSSED AFORESAID MAINLY COMPRISES OF INCOME FROM OTHER SOURCES. LOSS ON PURCHASE/SALE OF SHARES THEREFORE CANNOT BE TREATED AS SPECULATION LOSS AS THE APPELLANT'S CASE FALLS IN T HE EXCEPTIONAL CLAUSE TO THE EXPLANATION TO SEC.73 I.E. BEING A COMPANY W HOSE GROSS TOTAL INCOME MAINLY CONSISTS OF INCOME CHARGEABLE UNDER T HE HEAD 'INCOME ON SECURITIES, CAPITAL GAINS AND INCOME FROM OTHER SOURCES.' AS SUCH, PROVISIONS TO EXPLANATION TO SEC.73 DOES NOT APPLY TO ITA NO.3256/M/2012 ITA NO.3680/M/2012 M/S. VINAMRA UNIVERSAL TRADERS PVT. LTD. 6 THE APPELLANT'S CASE. LOSS OF RS.22 1.38 CRORES IN THE PURCHASE AND SAL E OF SHARES IS THEREFORE NOT A SPECULATION LOSS UNDER EXPLANATION TO SEC.73 FOR DETAILED REASONS AND CASE LAWS CITED ABOVE. 4.4 THIS GROUND OF APPEAL IS THEREFORE ALLOWED. 11. THE LD. CIT(A) THEREAFTER HELD THAT SINCE THE L OSS IN SHARE TRADING HAD BEEN TREATED BY HIM AS REGULAR BUSINESS LOSS AND NO T SPECULATION LOSS, HE THEREFORE TREATED THE AMOUNT OF EXPENDITURE OF RS.1 0 CRORES AS NORMAL BUSINESS EXPENDITURE AS AGAINST THE TREATMENT GIVEN BY THE A O AS INCURRED TOWARDS SPECULATIVE BUSINESS. 12. WE HAVE HEARD THE CONTENTIONS OF THE RIVAL PART IES AND ALSO GONE THROUGH THE RECORDS. AT THE OUTSET, THE LD. AR OF THE ASSE SSEE HAS BROUGHT OUR ATTENTION TO THE COMPUTATION OF INCOME, AS REPRODUCED IN THE IMPUGNED ORDER AND STATED THAT THE ASSESSEE HAS INCURRED A LOSS SO FAR AS BUS INESS INCOME IS CONCERNED. THE ASSESSEE HAD A POSITIVE INCOME FROM OTHER SOURC ES OF RS. 196673974/- HE HAS FURTHER SUBMITTED THAT, IN THE GROSS TOTA1 INCO ME OF THE ASSESSEE, PREDOMINANT POSITIVE INCOME WAS UNDER THE HEAD INC OME FROM OTHER SOURCES. HE HAS FURTHER RELIED UPON THE DECISION OF THE HON BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS HSBC SECURITIES & CAPITAL MARKE TS INDIA (P) LTD. REPORTED IN [2012] 23 TAXMAN.COM377(BOM) WHEREIN, H ONBLE BOMBAY HIGH COURT WHILE RELYING ON THE ANOTHER DECISION OF THE BOMBAY HIGH COURT IN THE CASE OF CIT VS DARSHAN SECURITIES PVT. LTD [2012] 206 TAXMAN 68 HAS HELD THAT SECTION 73 WOULD NOT APPLY TO A COMPANY WHOSE GROSS TOTAL INCOME CONSISTS MAINLY OF INCOME, WHICH IS CHARGEABLE UNDE R THE HEADS OF INTEREST, SECURITIES, INCOME FROM HOUSE PROPERTY, CAPITAL GAI NS & INCOME FROM OTHER SOURCES. THE LD. AR OF THE ASSESSEE HAS FURTHER PO INTED OUT THAT IN THE CASE OF HSBC SECURITIES (SUPRA), THE ONLY POSITIVE INCOME WAS INCOME FROM OTHER SOURCES WHEREAS BUSINESS INCOME WAS NEGATIVE I.E. L OSSES. THE HONBLE HIGH COURT HELD THAT SECTION 73 WAS NOT APPLICABLE TO T HE FACTS OF THE CASE OBSERVING AS UNDER: ITA NO.3256/M/2012 ITA NO.3680/M/2012 M/S. VINAMRA UNIVERSAL TRADERS PVT. LTD. 7 IN THE PRESENT CASE, SECTION 73 WOULD NOT APPLY IN VIEW OF THE FACT THAT THE EXPLANATION THERETO, DOES NOT OPERATE IN RESPECT OF A COMPANY WHOSE GROSS TOTAL INCOME CONSISTS MAINLY OF INCOME WHICH IS CHARGEABL E UNDER THE HEADS OF 'INTEREST ON SECURITIES', 'INCOME FROM HOUSING PROPERTY', 'CA PITAL GAINS' AND 'INCOME FROM OTHER SOURCES'. WE HAVE SET OUT THE RELEVANT PART O F THE ASSESSMENT ORDER WHICH INDICATES THAT IN THE RELEVANT YEAR, THE INCOME FRO M OTHER SOURCES WAS THE ONLY CHARGEABLE INCOME, AS THE RESPONDENT HAD SUFFERED A BUSINESS LOSS OTHERWISE. IN THAT VIEW OF THE MATTER, THE JUDGMENT OF THE DIV ISION BENCH OF THIS COURT IN THE CASE OF DARSHAN SECURITIES (P.) LTD.(SUPRA) SUPPORT S THE RESPONDENT'S CASE. IN THAT CASE, DURING THE RELEVANT ASSESSMENT YEAR, THE ASSE SSEE HAD A LOSS OF ABOUT RS. 2.33 CRORES IN THE SHARE TRADING AND HAD DIVIDEND INCOME OF ABOUT RS. 4.80 LACS. THE DIVISION BENCH HELD IN PARAGRAPHS 6, 7, 8 AND 9 AS UNDER :- '6. THE EXPLANATION TO SECTION 73 INTRODUCES A DEEM ING FICTION. THE DEEMING FICTION STIPULATES THAT WHERE ANY PART OF THE BUSINESS OF A COMPANY CONSISTS IN THE PURCHASE AND SALE OF SHARES OF OTHER COMPANIES, SUC H COMPANY SHALL, FOR THE PURPOSES OF THE SECTION BE DEEMED TO BE CARRYING ON A SPECULATION BUSINESS TO THE EXTENT TO WHICH THE BUSINESS CONSISTS OF THE PURCHA SE AND SALES OF SUCH SHARES. THE DEEMING FICTION APPLIES ONLY TO A COMPANY AND THE P ROVISION MAKES IT CLEAR THAT THE DEEMING FIXATION (SIC) EXTENDS ONLY FOR THE PURPOSE S OF THE SECTION. THE BRACKETED PORTION OF THE EXPLANATION, HOWEVER CARVES OUT AN E XCEPTION. THE EXCEPTION IS THAT THE PROVISION OF THE EXPLANATION SHALL NOT APPLY TO A COMPANY WHOSE GROSS TOTAL INCOME CONSISTS MAINLY OF INCOME WHICH IS CHARGEABL E UNDER THE HEADS 'INTEREST ON SECURITIES', 'INCOME FROM HOUSE PROPERTY', 'CAPITAL GAINS' AND 'INCOME FROM OTHER SOURCES' OR A COMPANY WHOSE PRINCIPAL BUSINESS IS O F BANKING OR THE GRANTING OF LOANS AND ADVANCES. 7. THE SUBMISSION WHICH HAS BEEN URGED ON BEHALF OF THE REVENUE IS THAT IN COMPUTING THE GROSS TOTAL INCOME FOR THE PURPOSE OF THE EXPLANATION TO SECTION 73, INCOME UNDER THE HEADS OF PROFITS AND GAINS OF BUSI NESS OR PROFESSION MUST BE IGNORED. ALTERNATIVELY, IT HAS BEEN URGED THAT WHER E THE INCOME FROM BUSINESS INCLUDES A LOSS IN THE TRADING OF SHARES, SUCH A LO SS SHOULD NOT BE ALLOWED TO BE SET OFF AGAINST THE INCOME FROM ANY OTHER SOURCE UNDER THE HEAD OF PROFITS AND GAINS OF BUSINESS OR PROFESSION. 8. IN OUR VIEW, THE SUBMISSION WHICH HAS BEEN URGED ON BEHALF OF THE REVENUE CANNOT BE ACCEPTED. LEAVING ASIDE FOR A MOMENT, THE EXCEPTION, WHICH IS CARVED OUT BY THE EXPLANATION TO SECTION 73, THE EXPLANATION C REATES A DEEMING FICTION BY WHICH A COMPANY IS DEEMED TO BE CARRYING ON A SPECU LATION BUSINESS WHERE ANY PART OF ITS BUSINESS CONSISTS IN THE PURCHASE AND S ALE OF SHARES OF OTHER COMPANIES. NOW, THE EXCEPTION WHICH IS CARVED OUT APPLIES TO A SITUATION WHERE THE GROSS TOTAL INCOME OF A COMPANY CONSISTS MAINLY OF INCOME WHICH IS CHARGEABLE UNDER THE HEADS 'INTEREST ON SECURITIES', 'INCOME FROM HOUSE PROPERTY', 'CAPITAL GAINS' AND 'INCOME FROM OTHER SOURCES'. NOW, ORDINARILY INCOME WHICH ARISES FROM ONE SOURCE WHICH FALLS UNDER THE HEAD OF PROFITS AND GAINS OF BUSINESS OR PROFESSION CAN BE SET OFF AGAINST THE LOSS WHICH ARISES FROM ANOTHER SOUR CE UNDER THE SAME HEAD. SUB- SECTION (1) OF SECTION 73 HOWEVER SETS UP A BAR TO THE SETTING OFF OF A LOSS WHICH ARISES IN RESPECT OF SPECULATION BUSINESS AGAINST T HE PROFITS AND GAINS OF ANY OTHER BUSINESS. CONSEQUENTLY, A LOSS WHICH HAS ARISEN ON ACCOUNT OF SPECULATION BUSINESS CAN BE SET OFF ONLY AGAINST THE PROFITS AND GAINS O F ANOTHER SPECULATION BUSINESS. HOWEVER, FOR SUB-SECTION (1) OF SECTION 73 TO APPLY THE LOSS MUST ARISE IN RELATION TO ITA NO.3256/M/2012 ITA NO.3680/M/2012 M/S. VINAMRA UNIVERSAL TRADERS PVT. LTD. 8 A SPECULATION BUSINESS. THE EXPLANATION PROVIDES A DEEMING DEFINITION OF WHEN A COMPANY IS DEEMED TO BE CARRYING ON A SPECULATION B USINESS. IF, THE SUBMISSION OF THE REVENUE IS ACCEPTED, IT WOULD LEAD TO AN INCONG RUOUS SITUATION, WHERE IN DETERMINING AS TO WHETHER A COMPANY IS OR, THE AMBI T OF SUB-SECTION (1) OF SECTION 73 IS ONLY TO PROHIBIT THE SETTING OFF OF A LOSS WH ICH HAS RESULTED FROM A SPECULATION BUSINESS, SAVE AND ACCEPT AGAINST THE PROFITS AND G AINS OF ANOTHER SPECULATION BUSINESS. IN ORDER TO DETERMINE WHETHER THE EXCEPTI ON THAT IS CARVED OUT BY THE EXPLANATION APPLIES, THE LEGISLATURE HAS FIRST MAND ATED A COMPUTATION OF THE GROSS TOTAL INCOME OF THE COMPANY. THE WORDS 'CONSISTS MA INLY' ARE INDICATIVE OF THE FACT THAT THE LEGISLATURE HAD IN ITS CONTEMPLATION THAT THE GROSS TOTAL INCOME CONSISTS PREDOMINANTLY OF INCOME FROM THE FOUR HEADS THAT AR E REFERRED TO THEREIN. OBVIOUSLY, IN COMPUTING THE GROSS TOTAL INCOME THE NORMAL PROVISIONS OF THE ACT MUST BE APPLIED AND IT IS ONLY THEREAFTER, THAT IT HAS TO BE DETERMINED AS TO WHETHER THE GROSS TOTAL INCOME SO COMPUTED CONSISTS MAINLY OF INCOME WHICH IS CHARGEABLE UNDER THE HEADS REFERRED TO IN THE EXPLANATION. 9. CONSEQUENTLY, IN THE PRESENT CASE THE GROSS TOTAL INCOME OF THE ASSESSEE WAS REQUIRED TO BE COMPUTED INTER ALIA BY COMPUTING THE INCOME UNDER THE HEAD OF PROFITS AND GAINS OF BUSINESS OR PROFESSION AS WELL. BOTH THE INCOME FROM SERVICE CHARGES IN TH E AMOUNT OF RS. 2.25 CRORES AND THE LOSS IN SHARE TRADING OF RS. 2.23 CRORES, WOULD HAVE TO BE TAKEN INTO ACCOUNT IN COMPUTING THE INCOME UNDER THAT HEAD, BOTH BEING SO URCES UNDER THE SAME HEAD. THE ASSESSEE HAD A DIVIDEND INCOME OF RS. 4.7 LACS (INCOME FROM OTHER SOURCES).THE TRIBUNAL WAS JUSTIFIED, IN COMING TO THE CONCLUSION THAT THE ASSESSEE FELL WITHIN THE PURVIEW OF THE EXCEPTION CARVED OUT IN THE EXPLANAT ION TO SECTION 73 AND THAT CONSEQUENTLY THE ASSESSEE WOULD NOT BE DEEMED TO BE CARRYING ON A SPECULATION BUSINESS FOR THE PURPOSE OF SEC. 73(1). 9. IN THE CIRCUMSTANCES, THE APPEAL IS DISMISSED BU T WITH NO ORDER AS TO COSTS. 13. SINCE THE FACTS AND ISSUE INVOLVED IN THE PRESE NT APPEAL ARE IDENTICAL TO THE CASE OF HSBC SECURITIES (SUPRA), RESPECTFULLY F OLLOWING THE DECISION OF THE HONBLE HIGH COURT IN THE GIVEN FACTS, WE DO NOT FI ND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) AND THE SAME IS THEREFORE U PHELD. ACCORDINGLY THE APPEAL OF THE REVENUE IS HEREBY DISMISSED. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE ALLOW ED AND THE APPEAL OF THE REVENUE IS HEREBY DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31.12.2015. SD/- SD/- (B.R. BASKARAN) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 31.12.2015. * KISHORE, SR. P.S. ITA NO.3256/M/2012 ITA NO.3680/M/2012 M/S. VINAMRA UNIVERSAL TRADERS PVT. LTD. 9 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.