THE ACIT, Circle-8, Ahmedabad V. SPHERE STOCK HOLDING PVT.LTD., Ahmedabad

ITA 3488/AHD/2003

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 7724 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 10 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2009
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 15-07-2009
• Assessment Year: 1997-1998
• Appeal Filed On: 11-09-2003
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJEEV AGARWAL
• Assessee Lawyers: S N SOPARKAR
• Keywords: Business income; Speculation loss; TDS; Capital Gains
• Section: 143(3); 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD A BENCH (BEFORE S/SHRI R.V.EASWAR, VICE-PRESIDENT AND N.S. SAINI, ACCOUNTANT MEMBER) ITA.NO.3488/AHD/2003 WITH CO NO.332/AHD/2004 [ASSTT.YEAR : 1997-98] ACIT, CENT.CIR.8 AHMEDABAD. VS. SPHERE STOCK HOLDING PVT. LTD. MITHAKHALI SIX ROAD NAVRANGPURA, AHMEDABAD. REVENUE BY : SHRI RAJEEV AGARWAL ASSESSEE BY : SHRI S.N.SOPARKAR O R D E R PER R.V.EASWAR, VICE-PRESIDENT : THESE APPEAL AND CO PERTAIN TO THE AY 1997-98. THE ASSESSEE IS A PRIVATE LIMITE D COMPANY ENGAGED IN SHARE TRADING. IT ALSO DERIVES INCOME BY WAY OF DIVIDEND ON THE SHARES, WHICH ARE UNDISPUTEDLY HELD AS STOCK IN TRADE, AND BROKERAGE. 2. IN THE RETURN OF INCOME THE ASSESSEE DECLARED BU SINESS LOSS OF RS.11,92,61,591 AND IN DOING SO COMMENCED THE COMPU TATION OF THE INCOME FROM THE NET LOSS OF RS.15,00,92,345 SHOWN IN THE P ROFIT AND LOSS ACCOUNT. THE PROFIT AND LOSS ACCOUNT (PAGE 14 OF THE PAPER BOOK) SHOWS, INTER ALIA , DIVIDEND INCOME OF RS.49,28,149, BROKERAGE INCOME OF RS.1,24 ,650, KASAR INCOME OF RS.104 AND INTEREST INCOME OF RS.39,672 ON INCOME-T AX REFUND IN THE CREDIT SIDE. ON THE DEBIT SIDE (THE EXPENDITURE SIDE), APA RT FROM PURCHASES OF SHARES THE ASSESSEE HAD DEBITED EXPENDITURE SUCH AS INTERE ST OF RS.6,39,33,267, LEGAL CHARGES, AUDIT FEES AND OTHER EXPENSES INCIDENTAL T O THE BUSINESS. THE NET LOSS SHOWN WAS RS.15,00,92,345 AND IT WAS FROM THIS FIGU RE THAT THE COMPUTATION OF TAXABLE INCOME WAS COMMENCED IN THE RETURN OF INCOM E AS MENTIONED ABOVE. 3. IN THE COURSE OF THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE IT ACT, THE ASSESSING OFFICER TOOK THE VIEW, BASED ON THE EXPLA NATION BELOW SEC.73 THAT PAGE - 2 ITA.NO.3488/AHD/2003 WITH CO NO.332/AHD/2004 -2- THE SHARE TRADING BUSINESS CARRIED ON BY THE ASSESS EE SHOULD BE DEEMED TO BE SPECULATION BUSINESS TO THE EXTENT TO WHICH THE BUS INESS CONSISTED OF THE PURCHASE AND SALE OF SHARES. HE THEREFORE PROCEEDED TO COMPUTE THE INCOME OR LOSS OF SUCH BUSINESS AND IN DOING SO, RECAST THE R ESULTS OF THE SHARE TRADING BUSINESS IN SUCH A MANNER THAT ONLY THE OPENING AND CLOSING STOCK OF THE SHARES, THE PURCHASES AND SALES OF THE SHARES WERE TAKEN IN TO ACCOUNT. IN THIS MANNER, HE ARRIVED AT THE LOSS FROM THE SHARE TRADING BUSIN ESS AT RS.9,11,40,511 AS FOLLOWS: DECREASE IN STOCK RS.12,42,59,333 SALES O F SHARES RS. 7,17,39,712 PURCHASES RS. 3,86,20,890 LOSS DUE TO TRADIN G SHARES RS 9,11,40,511 ___________ ____________ 16,28,80,233 16,28,80,223 ----------------- ------------------- THE ASSESSING OFFICER THUS PROCEEDED TO HOLD THAT T HE LOSS OF RS.9,11,40,511 INCURRED BY THE ASSESSEE DUE TO TRADING IN SHARES I S TREATED AS LOSS FROM THE SPECULATION BUSINESS AND THE SAME IS NOT ALLOWED TO BE SET OFF AGAINST ANY OTHER INCOME. ON THIS PREMISE, HE COMPUTED THE BUSINESS I NCOME OF THE ASSESSEE AT RS.1,64,426 WHICH CONSISTED OF THE FOLLOWING: BROKERAGE INCOME RS. 1,24,650 KASAR RS. 104 INTEREST ON I.T. REFUND RS. 39,672 ---------------- RS. 1,64,426 ---------------- IN ADDITION TO THE ABOVE, THE ASSESSING OFFICER ALS O BROUGHT THE DIVIDEND INCOME OF RS.49,28,149 TO TAX UNDER THE HEAD INCOM E FROM OTHER SOURCES. THE RESULT WAS THAT (A) THE SPECULATION LOSS WAS CO MPUTED AT RS.9,11,40,511 AND IT WAS NOT ALLOWED TO BE SET OFF AGAINST ANY OT HER INCOME AND (B) THE BROKERAGE AND OTHER INCOME WERE TAXED UNDER THE HEA D BUSINESS AGAINST WHICH THE SPECULATION LOSS WAS NOT ADJUSTED AND (C) THE DIVIDEND INCOME WAS PAGE - 3 ITA.NO.3488/AHD/2003 WITH CO NO.332/AHD/2004 -3- ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES AGAINST WHICH ALSO THE SPECULATION LOSS COULD NOT BE ADJUSTED. THE TOTAL I NCOME WAS ASSESSED AT RS.50,92,580 WHICH CONSISTED OF THE BUSINESS INCOME OF RS.1,64,426 AND THE DIVIDEND INCOME OF RS.49,28,149. 4. THERE IS ONE MORE ADJUSTMENT WHICH THE ASSESSING OFFICER MADE IN THE ASSESSMENT ORDER AND THAT IS TO COMPUTE THE NET LOS S IN THE SHARE BUSINESS, DEEMED TO BE SPECULATION BUSINESS, AT RS.15,51,84,9 20 IN THE FOLLOWING MANNER. ACCORDING TO HIM, THE EXPENDITURE OF RS.6,40,44,409 DEBITED IN THE PROFIT AND LOSS ACCOUNT WAS FOR CARRYING OUT THE BUSINESS OF S HARE TRADING AND THEREFORE IT HAS TO BE CONSIDERED AS PART OF THE LOSS IN THE SAI D BUSINESS. HE HAD ALREADY COMPUTED THE LOSS IN THE SHARE BUSINESS AT RS.9,11, 40,511. HE ADDED THE EXPENDITURE OF RS.6,40,44,409 TO THE SAME AND ARRIV ED AT THE NET LOSS IN THE SHARE BUSINESS AT RS.15,51,84,920. IN THE END OF TH E ASSESSMENT ORDER, HE OBSERVED THAT THIS FIGURE REPRESENTS THE SPECULATIO N LOSS AND IS ALLOWED TO BE CARRIED FORWARD. 5. IT WILL BE APPRECIATED FROM THE ABOVE THAT THE A SSESSING OFFICER EXCLUDED THE FOUR ITEMS OF INCOME BROKERAGE, KASA R, INTEREST ON TAX REFUND AND DIVIDEND FROM THE PURVIEW OF THE SPECULATION BUSINESS AND TAXED THEM UNDER THE HEADS BUSINESS AND INCOME FROM OTHER S OURCES. 6. THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) A ND QUESTIONED THE ASSESSMENT IN SO FAR AS IT RELATED TO ASSESSING THE DIVIDEND, BROKERAGE, KASAR AND INTEREST ON TAX REFUND AND TO THE COMPUTATION OF TH E SPECULATION LOSS AT RS.15,51,84,970. THE CIT(A) CONSIDERED THE SUBMISSI ONS OF THE ASSESSEE AND THE AUTHORITIES CITED BEFORE HIM AND RECORDED THE F OLLOWING FINDINGS: A) THE DIVIDEND INCOME WAS RECEIVED IN RESPECT OF SHAR ES WHICH WERE HELD AS STOCK IN TRADE. THEREFORE IT IS PART OF THE BUSI NESS INCOME, HAVING BEEN EARNED IN THE COURSE OF THE SHARE TRADING. PAGE - 4 ITA.NO.3488/AHD/2003 WITH CO NO.332/AHD/2004 -4- B) KASAR, BROKERAGE AND DIVIDEND INCOME ARE ALL INTER- LINKED, UNDISTINGUISHABLE AND INEXTRICABLY MIXED UP AND CAN NOT BE SEGREGATED. C) SINCE DIVIDEND INCOME IS PART OF THE BUSINESS INCOM E, IT CANNOT BE EXCLUDED AND SEPARATELY TAXED UNDER THE HEAD OTHER SOURCES; IT IS ALSO AVAILABLE FOR BEING ADJUSTED AGAINST THE LOSS FROM THE SHARE BUSINESS. SEC.56(2)(I) WHICH TAXES DIVIDEND UNDER THE HAD IN COME FROM OTHER SOURCES HAS NO ROLE TO PLAY IN APPLYING THE EXPLAN ATION BELOW SEC.73. D) THE ASSESSING OFFICER SHOULD HAVE COMPUTED THE PROF IT/LOSS FROM THE ENTIRE BUSINESS IN SHARES WITHOUT EXCLUDING THE VAR IOUS ITEMS OF INCOME FROM THE SAME AND DEEMED THE RESULTANT FIGURE AS SP ECULATION LOSS. THE VARIOUS ITEMS OF INCOME ARE PART OF THE SHARE BUSIN ESS AND SHOULD HAVE BEEN DEALT WITH ACCORDINGLY. IN VIEW OF THE ABOVE FINDINGS, THE CIT(A) HELD THAT THERE IS NO JUSTIFICATION IN TAXING SEPARATELY KASAR AS BUSINESS INCOME AND DIVIDEND INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES. THE ASSESSING OFFIC ER IS DIRECTED TO ADJUST THIS INCOME AGAINST THE LOSS AND AFTER SAME SHOULD BE ALLOWED TO BE CARRIED FORWARD. 7. THE REVENUE IS IN APPEAL AGAINST THE ABOVE DECIS ION OF THE CIT(A). WE MAY CLARIFY AT THE OUTSET THAT THOUGH THE CIT(A) HA S MENTIONED ONLY THE KASAR AND DIVIDEND INCOME IN THE PORTION QUOTED ABOVE, TH E DEPARTMENT HAS UNDERSTOOD HIS DECISION AS RELATING ALSO TO BROKERA GE AS CAN BE SEEN FROM THE FIRST GROUND TAKEN BY IT. WE ALSO AGREE WITH THIS U NDERSTANDING OF THE ORDER OF THE CIT(A) AS A READING OF THE ENTIRE PARAGRAPH 4.3 OF HIS ORDER SHOWS THAT HE CONSIDERED THE KASAR , BROKERAGE AND DIVIDEND INCOME (BUT NOT THE INTERE ST INCOME) AS FORMING PART OF THE BUSINESS OF SHARES. APPARENTLY IN THE FINAL SENTENCE OF THE PARAGRAPH, IT WAS OVERLOOKED BY HIM TO MENTION THE BROKERAGE INCOME SPECIFICALLY. BUT GOING BY THE TENOR OF HIS OBSERVATIONS IN THE SAID PARAGRAPH, IT IS CLEAR THAT EVEN THE BROKERAGE INCO ME WAS CONSIDERED BY HIM AS PART OF THE SHARE BUSINESS AND WHATEVER HE HAS STAT ED IN THE LAST SENTENCE OF THE PARAGRAPH WOULD EQUALLY APPLY TO THE BROKERAGE INCO ME ALSO. 8. WITH THIS CLARIFICATION, WE PROCEED TO CONSIDER THE CORRECTNESS OF THE DECISION OF THE CIT(A). IN OUR VIEW, HIS DECISION I S UNEXCEPTIONABLE IN SO FAR AS PAGE - 5 ITA.NO.3488/AHD/2003 WITH CO NO.332/AHD/2004 -5- IT RELATES TO THE DIVIDEND AND KASAR INCOME. THE EXPLANATION TO SEC.73 IN EFFECT SAYS THAT WHERE ANY PART OF THE BUSINESS OF A COMPA NY CONSISTS IN THE PURCHASE AND SALE OF SHARES OF OTHER COMPANIES, SUCH COMPANY SHALL, FOR THE PURPOSES OF THIS SECTION, BE DEEMED TO BE CARRYING ON A SPECULA TION BUSINESS TO THE EXTENT TO WHICH THE BUSINESS CONSISTS OF THE PURCHASE AND SAL E OF SUCH SHARES. THE ASSESSING OFFICER SEEMS TO HAVE TAKEN THE VIEW THAT ONLY THE PURCHASE AND SALE OF SHARES HAS TO BE CONSIDERED AS BUSINESS AND THE OTHER ITEMS OF RECEIPTS OR EXPENDITURE CANNOT BE CONSIDERED TO BE PART OF THE SAID BUSINESS. IN THIS, WITH RESPECT AND AS POINTED OUT BY THE CIT(A), HE SEEMS TO HAVE GONE WRONG. THE EXPLANATION REQUIRES US TO CONSIDER THE BUSINESS OF SHARES AS A WHOLE. THE BUSINESS CANNOT OBVIOUSLY BE CONFINED ONLY TO THE P URCHASE AND SALE; INCIDENTAL EXPENDITURE AND RECEIPTS ARE ALSO TO BE CONSIDERED AS PART OF THE BUSINESS. IN FACT, THE ASSESSING OFFICER HIMSELF HAS CONSIDERED THE EXPENDITURE AGGREGATING TO RS.6,40,44,409 WHICH INCLUDES INTEREST EXPENDITU RE OF RS.6,39,33,267 AS EXPENDITURE INCIDENTAL TO THE SHARE BUSINESS AND HA S ARRIVED AT THE SPECULATION LOSS AT RS.15,51,84,970. HAVING DONE SO, HE CANNOT POSSIBLY SAY THAT THE DIVIDEND AND KASAR INCOME, WHICH ARE INCIDENTAL TO THE SHARE BUSINESS , CANNOT BE CONSIDERED AS PART OF THE BUSINESS INCOME. TO DO SO SHOWS AN INCONSISTENT APPROACH. EVEN LEGALLY SPEAKING, WHILE APPLYING THE EXPLANATION TO SEC.73 ONE IS NOT REQUIRED TO BRING IN THE NOTION OF THE HEAD OF INCOME UNDER WHICH A PARTICULAR RECEIPT IS TO BE ASSESSED. THE EXPLANATI ON DOES NOT REFER TO ANY HEAD OF INCOME. THE DIVIDEND INCOME IS ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES ACCORDING TO SEC.56(2)(I) BUT THAT N OTION CANNOT BE BROUGHT INTO THE SAID EXPLANATION BECAUSE WHAT HAS TO BE CONSIDE RED, WHILE APPLYING THE EXPLANATION, IS THE BUSINESS OF SHARES AS A WHOLE. THE SHARES IN THE PRESENT CASE WERE HELD AS STOCK-IN-TRADE AND NOT AS INVESTMENT. IF THAT IS SO, THE DIVIDEND INCOME IS INCIDENTAL TO THE SHARE BUSINESS AND IT I S IRRELEVANT THAT SEC.56(2)(I) REQUIRES IT TO BE ASSESSED UNDER THE HEAD OTHER SO URCES. THIS IS THE PRINCIPLE PROPOUNDED BY THE SUPREME COURT IN CIT VS COCANADA RADHASWAMI BANK LTDS (1965) (57 ITR 306) AND REITERATED IN WESTERN STATE TRADING CO (P) LTD V PAGE - 6 ITA.NO.3488/AHD/2003 WITH CO NO.332/AHD/2004 -6- CIT (1971) (80 ITR 21). IT IS THE BUSINESS OF THE A SSESSEE-COMPANY TO TRADE IN SHARES AND THE DIVIDEND INCOME IS EARNED IN THE COU RSE OF SUCH BUSINESS, BUT FOR PURPOSES OF THE ASSESSMENT TO INCOME-TAX THE DIVIDE ND INCOME IS REQUIRED TO BE ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES . BUT THAT DOES NOT DETRACT FROM ITS CHARACTER OF BEING BUSINESS INCOME. QUITE APART FROM THE FACT THAT THE EXPLANATION TO SEC.73 DOES NOT REFER TO ANY HEAD OF INCOME BUT REFERS ONLY TO THE BUSINESS OF SHARES, SEC.56(1) ITSELF SAYS THAT INCOME OF EVERY KIND WHICH IS NOT TO BE EXCLUDED FROM THE TOTAL INCOME UNDER THE ACT SHALL BE CHARGED TO INCOME-TAX UNDER THE HEAD INCOME FROM OTHER SOURCE S, BUT ONLY IF IT IS NOT CHARGEABLE TO INCOME-TAX UNDER ANY OF THE HEADS SPE CIFIED IN SECTION 14, ITEMS A TO E. THE ASSESSMENT OF DIVIDEND INCOME UNDER TH E HEAD INCOME FROM OTHER SOURCES AS PROVIDED IN SUB-SECTION (2) OF SE C.56 IS WITHOUT PREJUDICE TO THE GENERALITY OF THE PROVISIONS OF SUB-SECTION (1) . THEREFORE, FOR THE PURPOSE OF APPLYING THE EXPLANATION TO SEC.73, THE DIVIDEND IN COME ARISING FROM SHARES HELD AS STOCK-IN-TRADE HAS TO BE CONSIDERED AS PART OF THE SHARE BUSINESS INCOME AND DEALT WITH ACCORDINGLY. THE SAME HOLDS GOOD FOR BROKERAGE (ON SHARES) AND KASAR . 9. THE CONTROVERSY HAS BEEN DECIDED IN SOME ORDERS OF THE TRIBUNAL WHICH WERE CITED BEFORE US ON BEHALF OF THE ASSESSEE. STA RLINE ISPAT & ALLOYS LTD V DCIT (2007) 108 TTJ 321 IS AN ORDER OF THE MUMBAI B ENCH OF THE TRIBUNAL WHERE IT WAS HELD, ON SIMILAR FACTS, THAT WHERE DIV IDEND IS RECEIVED BY A COMPANY ON SHARES HELD AS STOCK-IN-TRADE IT CANNOT BE DIVORCED FROM THE SHARE BUSINESS WHICH BY VIRTUE OF THE DEEMING PROVISIONS OF EXPLANATION TO SEC.73 IS TREATED AS SPECULATION BUSINESS AND THEREFORE THE D IVIDEND HAS TO BE VIEWED AS PROFITS OF THE SPECULATION BUSINESS, EVEN THOUGH AS SESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES BECAUSE OF SEC.56(2)(I) . A SIMILAR VIEW HAS BEEN TAKEN BY THE AHMEDABAD BENCH C IN THE CASE OF JCI T V VIVIDH LEASING & FINANCE LTD IN ITA NO.1892/AHD/1999 (AY 1994-95), D ATED 2-8-2005 AS ALSO IN THE CASE OF ACIT V MEGH MALHAR FINESTOCK (P) LTD (ITA NO.5303/AHD/1996 PAGE - 7 ITA.NO.3488/AHD/2003 WITH CO NO.332/AHD/2004 -7- & ITA NO.4599/AHD/1996, DATED 30-7-2002. THESE ORDE RS SUPPORT THE DECISION OF THE CIT(A) AND THE DEFENCE PUT UP BY THE ASSESSE E IN SO AS THE DIVIDEND INCOME AND KASAR INCOME ARE CONCERNED. 10. TWO ORDERS OF THE TRIBUNAL CITED BY THE DEPARTM ENT HAVE TO BE ADVERTED TO. THE FIRST IS THE ORDER OF THE MUMBAI BENCH IN D CIT V AAKROSH INVESTMENT & LEASING (P) LTD (2004) 90 ITD 287. IN THIS ORDER IT WAS HELD THAT WHERE SHARES ARE HELD AS STOCK-IN-TRADE (AND NOT AS INVES TMENT) THE DIVIDEND ON THE SHARES WOULD FORM PART OF INCOME FROM THE BUSINESS. IT WAS ACCORDINGLY HELD THAT WHERE THE DIVIDEND INCOME IS TAXABLE AS BUSINE SS INCOME AND THERE IS NO INCOME TO BE ASSESSED UNDER THE OTHER HEADS SUCH AS CAPITAL GAINS, INCOME FROM HOUSE PROPERTY, INTEREST ON SECURITIES OR INCOME FROM OTHER SOURCES, THE ASSESSEE WILL HAVE INCOME ONLY UNDER THE HEAD BUSINESS WHICH WOULD ATTRACT THE EXPLANATION TO SEC.73. THIS DECISION SE EMS TO US TO SUPPORT THE ASSESSEE AND NOT THE DEPARTMENT AS IN THE PRESENT C ASE IT IS THE CONTENTION OF THE ASSESSEE, ACCEPTED BY THE CIT(A), THAT THE DIVIDEND INCOME IS TO BE CONSIDERED AS BUSINESS INCOME AS THE SHARES ARE HELD AS STOCK- IN-TRADE. THE RELIANCE PLACED BY THE REVENUE ON THIS ORDER APPEARS TO US, WITH RE SPECT, TO BE INAPPROPRIATE. 11. HOWEVER, THE ORDER OF THE DELHI BENCH OF THE T RIBUNAL IN M.G. CAPITAL SERVICES LTD V ACIT (2004) 91 TTJ 214, WHICH DEALS WITH THE QUESTION WHETHER THE SPECULATION LOSS CAN BE SET OFF AGAINST THE BROKERAGE INCOME, SUPPORTS THE DEPARTMENT IN ITS OBJECTION THAT THE B ROKERAGE INCOME CANNOT BE CONSIDERED TO BE PART OF THE SPECULATION BUSINESS. IN PARAGRAPH 16 OF THE ORDER, THE DELHI BENCH HELD THAT IT IS A WELL-SETTLED PROP OSITION THAT THE BROKERAGE INCOME EARNED BY AN ASSESSEE AS A SHARE BROKER CANN OT BE SET OFF AGAINST THE SPECULATION LOSS BECAUSE THERE WAS NO ELEMENT OF SP ECULATION WHATEVER IN THE BROKERAGE INCOME RECEIVED BY THE ASSESSEE, WHICH WA S INDEPENDENT OF THE FLUCTUATIONS IN THE MARKET AND THERE WAS NO RISK IN EARNING IT. IN REACHING THIS CONCLUSION THE BENCH FOLLOWED THE JUDGMENT OF THE S UPREME COURT IN CIT V PAGE - 8 ITA.NO.3488/AHD/2003 WITH CO NO.332/AHD/2004 -8- PANGAL VITTAL NAYAK & CO (P) LTD (1969) 74 ITR 754 AND THE JUDGMENT OF THE CALCUTTA HIGH COURT IN CIT V K.L. JHUNJHUNUWALA (19 83) 139 ITR 371. WE HAVE ALSO GONE THROUGH THESE JUDGMENTS AND FIND THA T A DISTINCTION HAS BEEN MADE THEREIN BETWEEN THE SHARE BUSINESS CARRIED ON BY THE ASSESSEE ON ITS OWN ACCOUNT AND THE BUSINESS CARRIED ON BY IT FOR COMMI SSION ON BEHALF OF OTHER CONSTITUENTS. WHILE THE PROFITS DERIVED FROM THE SH ARE BUSINESS CARRIED ON BY THE ASSESSEE ON ITS OWN ACCOUNT HAVE BEEN HELD TO B E PROFITS DERIVED FROM A SPECULATION BUSINESS, THE BROKERAGE OR COMMISSION D ERIVED BY IT FROM THE SHARE BUSINESS CARRIED ON ON BEHALF OF THE CONSTITUENTS/C LIENTS WAS HELD NOT TO BE PROFIT FROM THE SPECULATION BUSINESS BUT AS PROFIT FROM THE BUSINESS AS A BROKER. ACCORDINGLY IT WAS HELD THAT THE ASSESSEE WAS NOT E NTITLED TO HAVE THE COMMISSION/BROKERAGE RECEIPTS ASSESSED AS SPECULATI ON PROFITS. THE DECISION OF THE SUPREME COURT (SUPRA) WAS RENDERED UNDER THE OL D IT ACT OF 1922 AND THE SAME WAS FOLLOWED BY THE CALCUTTA HIGH COURT (SUPRA ) FOR THE ASSESSMENT YEAR 1964-65 TO WHICH THE IT ACT, 1961 IS APPLICABLE. N O DECISION OF THE AHMEDABAD BENCH OF THE TRIBUNAL OR THE HONBLE JURI SDICTIONAL HIGH COURT TAKING A CONTRARY VIEW WAS BROUGHT TO OUR NOTICE ON BEHALF OF THE ASSESSEE, IN SO FAR AS BROKERAGE INCOME IS CONCERNED. THEREFORE, RESPECTFULLY FOLLOWING THE ORDER OF THE DELHI BENCH OF THE TRIBUNAL (SUPRA) CI TED BY THE LEARNED CIT-DR, IN WHICH THE JUDGMENTS OF THE SUPREME COURT AND CAL CUTTA HIGH COURT HAVE BEEN FOLLOWED, WE HOLD THAT THE BROKERAGE INCOME OF RS.1,24,650 WAS RIGHTLY NOT TREATED AS PART OF THE SPECULATION BUSINESS. 12. WE THUS CONFIRM THE DECISION OF THE CIT(A) IN S O FAR AS IT RELATES TO THE DIVIDEND AND KASAR INCOME AND REVERSE THE SAME IN SO FAR AS IT RELATE S TO THE BROKERAGE INCOME. THE FIRST GROUND OF THE DEPARTMEN T IS PARTLY ALLOWED. THE OTHER TWO GROUNDS BEING GENERAL, NO DECISION IS REQ UIRED. 13. SO FAR AS THE CO OF THE ASSESSEE IS CONCERNED, THE FIRST GROUND IS THAT THE CIT(A) DID NOT ADJUDICATE UPON THE GROUND THAT THE ASSESSING OFFICER ERRED IN PAGE - 9 ITA.NO.3488/AHD/2003 WITH CO NO.332/AHD/2004 -9- NOT ALLOWING THE CARRIED FORWARD LOSSES OF EARLIER YEARS WHICH ARE DETERMINED AS ALLOWED TO BE CARRIED FORWARD IN THE EARLIER ASSESS MENT PROCEEDINGS AND THAT THE ASSESSING OFFICER OUGHT TO HAVE ACCORDINGLY REDUCED THE BUSINESS INCOME TO NIL. WE RESTORE THIS GROUND TO THE ASSESSING OFFI CER FOR A FRESH DECISION IN ACCORDANCE WITH LAW AFTER DUE OPPORTUNITY TO THE AS SESSEE. 14. THE SECOND GROUND AGAINST THE INTEREST CHARGED U/S 234B IS CONSEQUENTIAL. THE ASSESSING OFFICER IS DIRECTED TO GIVE CONSEQUENTIAL RELIEF, IF ANY. 15. IN THE RESULT, BOTH THE APPEAL AND THE CO ARE P ARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 24 TH JULY, 2009. SD/- SD/- (N.S.SAINI) ACCOUNTANT MEMBER (R.V.EASWAR) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 24-07-2009 COPY OF THE ORDER FORWARDED TO: 1) : ASSESSEE 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR, ITAT, AHMEDABAD