Longview Trade & Credit Pvt. Ltd., Kolkata V. ITO, Ward 6(2), Kolkata, Kolkata

ITA 610/KOL/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1572 (ITAT-KOLKATA)
• Duration Of Justice: 5 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 29-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BANIBRATA DUTTA
• Assessee Lawyers: MIRAJ D. SHAH
• Keywords: Business income; Principle of natural justice; Retrospective amendment; Additional evidence; Speculation loss

Judgement Text

, D , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH D KOLKATA BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBER ITA NO.610/KOL/2017 ASSESSMENT YEAR:2008-09 LONGVIEW TRADE & CREDIT PVT. LTD., C/O D.J SHAH & CO. KALYAN BHAVAN, 2 ELGIN ROAD, KOLKATA-20 [ PAN NO.AAACL 8780 D ] / V/S . ITO WARD-6(2), AAYAKAR BHAWAN,A P-7, CHOWRINGHEE SQUARE, KOLKATA-69 /APPELLANT .. /RESPONDENT /BY APPELLANT SHRI MIRAJ D SHAH, ADVOCATE /BY RESPONDENT SHRI BANIBRATA DUTTA, ADDL. CIT-DR ! /DATE OF HEARING 29-06-2017 ! /DATE OF PRONOUNCEMENT 30-08-2017 /O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER O F COMMISSIONER OF INCOME TAX (APPEALS)-17, KOLKATA DATED 28.10.2016. ASSESSM ENT WAS FRAMED BY ITO WARD- 6(2), KOLKATA U/S 115WE(3) OF THE INCOME TAX ACT, 1 961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 30.12.2010 FOR ASSE SSMENT YEAR 2008-09. THE GROUNDS RAISED BY THE ASSESSEE PER ITS APPEAL ARE AS UNDER: - 1. FOR THE FACTS AND CIRCUMSTANCES OF THE CASE THE APPELLATE ORDER PASSED WAS IN VIOLATION OF PRINCIPALS OF NATURAL JUSTICE HENCE IS BAD IN LAW AND BE QUASHED. 2. FOR THAT IN THE FACTS AND CIRCUMSTANCES OF THE C ASE LD. COMMISSIONER OF INCOME TAX APPEALS ERRED IN CONFIRMING THAT THE SHA RE LOSS OF RS.11,87,934/- IS ITA NO.610/KOL/2017 A.Y. 2008-0 9 LOGVIEW TRADE & CREDIT PVT. LTD. VS. ITO WD-6(2) KOL. PAGE 2 COVERED BY THE EXPLANATION TO SECTION 73 OF THE IT ACT 1961. THE COMMISSIONER OF INCOME TAX APPEALS IS NOT JUSTIFIED IN DOING SO AND THUS THE ADDITION BE DELETED. 3. THE APPELLANT CRAVES LEAVE TO PRODUCE ADDITIONAL EVIDENCES IN TERMS OF RULE 29 OF THE INCOME TAX (APPELLATE TRIBUNAL)RULES 1963 4. THE APPELLANT CRAVES LEAVE TO PRESS NEW, ADDITIO NAL GROUNDS OF APPEAL OR MODIFY, WITHDRAW ANY OF THE ABOVE GROUNDS AT THE TI ME OF HEARING OF THE APPEAL. SHRI MIRAJ D SHAH LD. ADVOCATE APPEARED ON BEHALF O F ASSESSEE AND SHRI BANIBRATA DUTTA, LD. DEPARTMENTAL REPRESENTATIVE REPRESENTED ON BEHALF OF REVENUE. 2. SOLITARY ISSUE RAISED BY ASSESSEE IN THIS APPEAL IS THAT LD. CIT(A) ERRED IN TREATING THE LOSS OF 11,87,934/- AS SPECULATION IN NATURE IN PURSUANT TO EXPLANATION TO SECTION 73 OF THE ACT. 3. BRIEFLY STATED FACTS ARE THAT ASSESSEE IS A PRIV ATE LIMITED COMPANY AND ENGAGED IN BUSINESS OF INVESTMENT AND FINANCING. THE ASSESS EE IN THE YEAR UNDER CONSIDERATION HAS SHOWN FOLLOWING INCOME IN ITS PROFIT AND LOSS A CCOUNT:- SL.NO. PARTICULARS AMOUNT (RS) 1. PROFIT FROM SHARE TRADING 83,22,066 2. LOSS FROM SHARE TRADING 95,10,00 0 NET LOSS FROM SHARE TRADIN G 11,87,934 3. INTEREST INCOME 6,65,459 4. CONSULTANCY INCOME 7,20,000/- FROM THE ABOVE, THE ASSESSING OFFICER OPINED THAT S HARE TRADING LOSS IS SPECULATION IN NATURE BY VIRTUE OF THE PROVISION OF EXPLANATION TO SECTION 73 OF THE ACT. ACCORDINGLY, AO CALLED UPON THE ASSESSEE TO EXPLAIN THE REASON F OR NOT TREATING THE IMPUGNED LOSS FROM SHARE TRADING AS SPECULATION IN NATURE. IN COM PLIANCE THERETO THE ASSESSEE SUBMITTED THAT THE INCOME FROM INTEREST AND CONSULT ANCY IS ACTUALLY THE INCOME FROM OTHER SOURCE. THUS, THE EXCEPTION PROVIDED UNDER TH E PROVISION OF EXPLANATION TO SECTION 73 OF THE ACT I.E. IF THE INCOME FROM OTHER SOURCES EXCEEDS LOSS FROM SHARE TRADING THEN IT WILL BE OUT OF THE RIGOROUS PROVISI ON OF EXPLANATION TO SECTION 73 OF THE ACT. HOWEVER, AO DISREGARDED THE CONTENTION OF ASSE SSEE BY OBSERVING THAT INCOME FROM INTEREST AND CONSULTANCY WAS CLASSIFIED BY THE ASSESSEE UNDER THE HEAD BUSINESS ITA NO.610/KOL/2017 A.Y. 2008-0 9 LOGVIEW TRADE & CREDIT PVT. LTD. VS. ITO WD-6(2) KOL. PAGE 3 AND THEREFORE THE STAND TAKEN BY IT IS JUST TO ESCA PE FROM THE PROVISION OF EXPLANATION TO SECTION 73 OF THE ACT. ACCORDINGLY, AO TREATED T HE LOSS OF 11,87,934/- AS SPECULATION IN NATURE AND ALLOWED TO BE CARRIED FOR WARD TO THE SUBSEQUENT YEARS FOR SETTING OF THE SAME AGAINST THE SPECULATION PROFIT ONLY. 4. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A).THE ASSESSEE BEFORE LD. CIT(A) SUBMITTED ITS BUSINESS INCOME AND INCOM E FROM OTHER SOURCE AS DETAILED UNDER:- INCOME FROM SHARES (BUSINESS INCOME) SHARE LOSS (RS.11,87,934) INTEREST RS.6,65,459 NET BUSINESS INCOME FORM SHARES RS.5,22,475 INCOME FROM INTEREST &CONSULTANCY (UNDER HEAD INCOME FROM OTHER SOURCES) AS PER ASSESSEE RS.7,20,000 FROM THE ABOVE, ASSESSEE JUSTIFIED THAT THE INCOME FROM OTHER SOURCES EXCEEDS THE BUSINESS INCOME THEREFORE THE EXPLANATION TO SECTIO N 73 OF THE ACT IS NOT APPLICABLE IN THE INSTANT CASE. HOWEVER, LD. CIT(A) DISREGARDE D THE CONTENTION OF ASSESSEE BY OBSERVING AS UNDER:- DECISION : I HAVE GONE THROUGH THE FINDINGS OF THE ASSESSING OFFICER AND THE SUBMISSIONS OF THE ASSESSEE CAREFULLY. THE ONLY ISS U9E IN THIS CASE IS THE TREATMENT OF SHARE LOSS OF RS.11,87,934/- AS SPECUL ATIVE INCOME BY INVOKING THE EXPLANATION TO SECTION 73. THE ONLY DISPUTED IN THI S CASE IS WHETHER THE INCOME OF THE ASSESSEE UNDER THE HEAD INCOME FROM OTHER SO URCES IS HIGHER THAN THE INCOME UNDER THE HEAD BUSINESS INCOME OR NOT. THE A SSESSEE CLAIMS THAT THE INCOME UNDER THE HEAD OTHER SOURCES IS HIGHER THAN THE INCOME UNDER THE HEAD BUSINESS INCOME AND ACCORDINGLY THEY DO NOT FALL WI THIN THE PURVIEW OF THE EXPLANATION TO SECTION 73. THE COMPUTATION OF INCOM E OF THE ASSESSEE, AS PER THE ASSESSEE, IS AS FOLLOWS: INCOME FROM SHARES (BUSINESS INCOME) SHARE LOSS (RS.11,87,934) INTEREST RS.6,65,459 NET BUSINESS INCOME FORM SHARES RS.5,22,475 ITA NO.610/KOL/2017 A.Y. 2008-0 9 LOGVIEW TRADE & CREDIT PVT. LTD. VS. ITO WD-6(2) KOL. PAGE 4 INCOME FROM INTEREST &CONSULTANCY (UNDER HEAD INCOME FROM OTHER SOURCES) AS PER ASSESSEE RS.7,20,000 THE ASSESSEE HAS ARGUED THAT AS THE INCOME FROM TH E HEAD OTHER SOURCES (RS.720000/-) EXCEEDS THE INCOME UNDER THE HEAD BUS INESS INCOME (RS.522475/-) THEY ARE NOT HIT BY THE PROVISIONS OF EXPLANATION TO SECTION 73. THE ASSESSEE IN PARA 15 OF HIS WRITTEN SUBMISSION H AS STATED THAT THE COMPUTATION OF INCOME MADE BY THE AO IN THE ASSESSM ENT ORDER IS AS FOLLOWS: INCOME FROM BUSINESS INCOME FROM SHARES (RS.11,87,934) INCOME FROM CONSULTANCY RS.6,65,459 INCOME UNDER THE HEAD INCOME FROM BUSINESS A RS.5,22,475 INCOME FROM OTHER SOURCES B RS.7,20,000 THE ASSESSEE HAS FURTHER ARGUED THAT THE COMPUTATIO N INCOME IS INCORRECT BECAUSE THE CONSULTANCY INCOME AS REQUIRED TO BE AS SED UNDER THE HEAD INCOME FROM OTHER SOURCES. IT HAS BEEN FURTHER SUBMITTED T HAT EVEN WITH THIS COMPUTATION OF THE AO, TO WHICH THEY DO NOT AGREE, EXPLANATION TO SECTION 73 IS NOT APPLICABLE AS THE INCOME UNDER THE HEAD OTHE R SOURCES STILL EXCEEDS THE INCOME UNDER THE HEAD INCOME FROM BUSINESS AND PRO FESSION. HOWEVER, ON PERUSAL OF THE ASSESSMENT ORDER IT IS S EEN THAT THE CONTENTION OF THE ASSESSEE REGARDING THE COMPUTATION OF INCOME CL AIMED TO HAVE BEEN MADE BY THE AO IS INCORRECT. THE AO IN FACT HAS ASSESSED THE ENTIRE INCOME OF THE ASSESSEE UNDER THE HEAD INCOME FROM BUSINESS AND PR OFESSION. THE AO IN HIS ASSESSMENT ORDER HAS COMMENTED ON THE INTEREST INCO ME AND THE CONSULTANCY INCOME AS FOLLOWS: THE ASSESSEE HAS FURTHER CLAIMED THAT INTEREST INC OME OF RS.665459/- AND CONSULTANCY OF RS.720000/- ARE TO BE TREATED AS IN FROM OTHER SOURCES TO SAVE THE COMPANY FROM THE PURVIEW OF EXP LANATION TO SECTION 73 OF THE IT ACT. HOWEVER, IN THE IT RETURN AND COM PUTATION OF AYR. 2008-09 AS REFLECTED IN AST MODULE, THE INTEREST AN D CONSULTANCY INCOME HAVE BEEN SHOWN AS BUSINESS INCOME. NO REVIS ED RETURN / COMPUTATION WAS FILED BY THE ASSESSEE COMPANY. THE ASSESSING OFFICER HAS VERIFIED THE RETURN OF TH E ASSESSEE AND HAS GIVEN A DEFINITE FINDING THAT THE ASSESSEE HIMSELF IN THE R ETURN OF INCOME HAS SHOWN THE INTEREST INCOME AND THE CONSULTANCY INCOME AS BUSIN ESS INCOME. THE ASSESSEE HAS NOT CHALLENGED THE FINDINGS OF THE AO BEFORE ME BY ADDUCING THE COPY OF THE RETURN OF INCOME OR THE COMPUTATION OF INCOME. THEREFORE, THE CONTENTION OF THE ASSESSEE IS INCORRECT. THE AO HAS ASSESSED THE ENTIRE RECEIPT OF INTEREST AND CONSULTANCY UNDER THE HEAD BUSINESS INCOME OF RS.12 02540/- AS CAN BE SEEN ON PAGE 6 OF THE ASSESSMENT ORDER. NO INCOME HAS BEEN ASSESSE D UNDER THE HEAD OTHER SOURCES. THEREFORE THE CONTENTION OF THE ASSE SSEE REGARDING THE COMPUTATION OF INCOME IS FOUND TO BE INCORRECT. THE CASE OF THE ASSESSEE IS ITA NO.610/KOL/2017 A.Y. 2008-0 9 LOGVIEW TRADE & CREDIT PVT. LTD. VS. ITO WD-6(2) KOL. PAGE 5 CLEARLY HIT BY THE PROVISIONS OF EXPLANATION TO SEC TION 73. THE ACTION OF THE AO IN TREATING THE SHARE LOSS OF RS.11,87,934/- AS SPE CULATIVE LOSS IS HEREBY CONFIRMED. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) ASSESSE E CAME IN SECOND APPEAL BEFORE US. 5. BEFORE US LD. AR FOR THE ASSESSEE FILED PAPER BO OK WHICH IS RUNNING PAGES 1 TO 76 AND SUBMITTED THAT TRANSACTIONS OF PURCHASE AND SALE OF SHARES ARE TO BE HELD AS SPECULATION BUSINESS INCOME ONLY IF IT HIT BY EXPLA NATION TO SECTION 73 OF THE ACT. THE IMPLICATION OF EXPLANATION IS THAT IF AN ASSESSEE I NCURS A SPECULATION LOSS IN A MANNER DEEMED IN THE EXPLANATION SUCH LOSS SHALL NOT BE SE T OFF EXCEPT AGAINST THE PROFIT AND GAIN, IF ANY, OF ANOTHER SPECULATION BUSINESS. HOWE VER THERE ARE TWO EXCEPTIONS PROVIDED UNDER EXPLANATION TO SECTION 73 OF THE ACT . THE FIRST EXCEPTION PROVIDED IN EXPLANATION TO SECT ION 73 OF THE ACT IS THAT IN CASE GROSS TOTAL INCOME CONSISTS MAINLY OF INCOME WHICH IS CHARGEABLE UNDER THE HEAD INTEREST ON SECURITIES, INCOME FROM HOUSE PROPERTY , CAPITAL GAINS AND INCOME FROM OTHER SOURCES THEN EXPLANATION TO SECTION 73 OF TH E ACT WILL NOT BE APPLIED. 5.1 SECOND EXCEPTION IS THAT THE PROVISION OF EXPLA NATION TO SECTION 73 OF THE ACT WILL NOT BE APPLIED TO A COMPANY IF THE PRINCIPAL B USINESS OF WHICH IS THE BUSINESS OF TRADING IN SHARES OR BANKING ARE GRANTING OF LOAN A ND ADVANCES. LD. AR FURTHER SUBMITTED THAT PRINCIPAL BUSINESS HA S NOT BEEN DEFINED UNDER THE ACT BUT IT HAS TO BE UNDERSTOOD AFTER CONSIDERING THE O BJECTS AND ACTIVITIES OF ASSESSEE- COMPANY OVER A PERIOD OF TIME. THEN ONLY IT CAN BE DETERMINED THE PRINCIPAL BUSINESS OF THE ASSESSEE. LD. AR IN SUPPORT OF ASSESSEES CL AIM WITH REGARD TO THE PRINCIPAL BUSINESS OF THE ASSESSEE HAS RELIED ON THE ORDER OF CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF DCIT VS. VENKATESWAR INVESTMENT 93 ITD 177 (KOL). LD. AR ALSO SUBMITTED THAT THERE IS AN AMENDMENT UN DER THE PROVISION OF EXPLANATION TO SECTION 73 OF THE ACT WITH EFFECT FROM 01.04.201 5 WHEREIN AN EXCEPTION WAS GRANTED TO THE COMPANY OF WHICH THE PRINCIPAL BUSIN ESS WAS TRADING IN SHARES. THOUGH THIS AMENDMENT WAS BROUGHT UNDER THE STATUTE WITH E FFECT FROM 01.04.2015 BUT VARIOUS COURTS HAVE HELD THAT IT IS RETROSPECTIVE I N NATURE. IN THIS CONNECTION, LD. AR HAS RELIED ON THE ORDER OF THIS TRIBUNAL IN THE CAS E OF DCIT VS. RAIMA EQUATES PVT LTD. ITA NO.610/KOL/2017 A.Y. 2008-0 9 LOGVIEW TRADE & CREDIT PVT. LTD. VS. ITO WD-6(2) KOL. PAGE 6 IN ITA NO.1994/KOL/2013 VIDE ORDER DATED 11.08.2016. THUS, IN VIEW OF ABOV E, THE LD. AR STRESSED THAT THE PRINCIPAL BUSINESS OF THE ASSESSEE IS GRANTING OF LOAN AND SHARE TRADING WHICH IS FALLING UNDER THE EXCEPTION CATEGO RY. THEREFORE, THIS IMPUGNED LOSS CANNOT BE TREATED AS SPECULATION IN NATURE. LD. AR IN JUSTIFYING THE PRINCIPAL BUSINESS OF THE ASSESSEE HAS PRODUCED A CHART WHICH IS SHOWI NG THE INCOME OF THE ASSESSEE IN THE EARLIER YEARS AS WELL AS IN THE SUBSEQUENT YEAR S. SUCH CHART OF THE ASSESSEE IS ENCLOSED AT PAGE 23 OF THE PAPER BOOK. HOWEVER, SAM E CHART IS ALSO ENCLOSED WITH THE ORDER FOR THE SAKE OF READY REFERENCE AS ANNEXURE-1 . ON THE OTHER HAND, LD. DR SUBMITTED THAT THE CONSUL TANCY INCOME CANNOT BE TREATED AS INCOME FROM OTHER SOURCES. HE VEHEMENTLY RELIED ON THE ORDER OF AUTHORITIES BELOW. 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD; INCLUD ING THE JUDICIAL PRONOUNCEMENTS CITED AND PLACED RELIANCE UPON. IN THE INSTANT CASE AO HAS TREATED THE LOSS FROM THE SHARE TRANSACTIONS AS SPECULATION LOSS BY VIRTUE OF THE PROVISION OF EXPLANATION TO SECTION 73 OF THE ACT. HOWEVER, LD. AR BEFORE US JU STIFIED THAT CASE OF ASSESSEE IS FALLING UNDER THE EXCEPTION I.E. PRINCIPAL BUSINESS OF THE ASSESSEE IS TRADING IN SHARES. IN THIS REGARD, WE FIND THAT ASSESSEE HAS BEEN SHOW ING ITS INCOME FROM SHARE TRADING IN ALL THE YEARS BEGINNING FROM FINANCIAL YEARS 2005-0 6 TO 2009-10. HOWEVER, THE INCOME FROM CONSULTANCY FOR 7.20 LAKH WAS SHOWN ONLY IN THE YEAR UNDER CONSIDER ATION. SIMILARLY, THE INTEREST INCOME HAS NOT BEEN SHOWN E VERY YEAR BY THE ASSESSEE. 6.1 IN VIEW OF THE ABOVE, IT CAN BE CONCLUDED THAT PRINCIPAL BUSINESS OF THE ASSESSEE IS OF SHARE TRADING AND GRANTING OF LOAN AND THEREF ORE IT IS OUTSIDE THE PURVIEW OF PROVISION OF EXPLANATION TO SECTION 73 OF THE ACT. NOW, IT IS WELL SETTLED THAT THE AMENDMENT UNDER THE EXPLANATION TO SECTION 73 OF TH E ACT FOR TREATING THE PRINCIPAL BUSINESS OF SHARE TRADING UNDER EXCEPTION CATEGORY WITH RETROSPECTIVE EFFECT IN NATURE AS HELD BY THE CO-ORDINATE BENCH OF THIS TRIBUNAL I N THE CASE OF ITO VS. ATN INTERNATIONAL LIMITED IN ITA NOS. 1531 & 1532/KOL/2011 . THE RELEVANT EXTRACT OF THE ORDER IS REPRODUCED BELOW:- 3.7. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE HOLD THAT IT IS NOT IN DISPUTE THAT THE PRINCIPAL BUSINESS OF THE ASSESSEE IS TRADING IN SH ARES. WE FIND THAT THE AMENDMENT WAS BROUGHT BY FINANCE ACT 2014 W.E.F. 1.4.2015 BY INSERTION OF THE EXPRESSIO N - PRINCIPAL BUSINESS OF WHICH IS THE BUSINESS OF 'TRA DING IN SHARES' OR BANKING ............ IN EXPLANATION TO SECTION 73 OF THE ACT. IT WOULD BE PERTINENT TO REFER TO THE ITA NO.610/KOL/2017 A.Y. 2008-0 9 LOGVIEW TRADE & CREDIT PVT. LTD. VS. ITO WD-6(2) KOL. PAGE 7 RECOMMENDATIONS OF WANCHOO COMMITTEE REPORT OF DECE MBER 1971 PURSUANT TO WHICH THE EXPLANATION TO SECTION 73 OF THE ACT WAS INSERTED BY THE TAXATION LAWS (AMENDMENT) ACT , 1975 W.E.F. 01.04.1977, THE RELEVANT PORTION OF W HICH IS EXTRACTED HEREUNDER:- 'A TAX AVOIDANCE DEVICE OFTEN RESORTED TO BY BUSINE SS HOUSES CONTROLLING GROUPS OF COMPANIES IS MANIPULATION OF RESULTS FROM DEALINGS IN SHARES OF THE COMPANIES CONTROLLED BY THEM. IN OUR OPINION, SUCH MANIPULATI ON IN SHARE DEALINGS FOR THE PURPOSE OF TAX AVOIDANCE CAN BE CHECKED EFFECTIVELY IF THE RESULTS OF DEALINGS IN SHARES BY SUCH COMPANIES ARE TREATED FOR TAX PURPOSES IN A MANNER ANALOGOUS TO SPECULATION. NO DOUBT, COMPANIES WHOSE MAIN BUSINESS ACTIVITIES CENTRE AROUND INVESTMENT IN SHARES WILL HAVE TO BE LEFT OUT. ACCORDINGLY, WE RE COMMEND THAT THE RESULTS OF DEALINGS IN SHARES BY COMPANIES, OTHER THAN INVESTMENT, BANK ING AND FINANCE COMPANIES, SHOULD BE TREATED IN A MANNER ANALOGOUS TO SPECULAT ION BUSINESS.' 3.7.1. WE FIND THAT IN ORDER TO ACHIEVE THE REAL OB JECTIVE OF CURBING TAX AVOIDANCE METHODS RESORTED TO BY BUSINESS HOUSES CONTROLLING THEIR GROUP COMPANIES, THE LEGISLATURE BY INSERTING AN AMENDMENT TO EXPLANATIO N TO SECTION 73 OF THE ACT BY FINANCE ACT 2014, HAS EXTENDED THE EXCEPTION CARVED OUT IN THE EXPLANATION BY PUTTING ALL THE COMPANIES, THE PRINCIPAL BUSINESS O F WHICH IS THE BUSINESS OF TRADING IN SHARES INTO THE EXCEPTION. WE FIND THAT THE AMENDME NT BROUGHT IN BY THE FINANCE ACT 2014 IN EXPLANATION TO SECTION 73 OF THE ITA NOS. 1531 & 1532/KOL/2011 ATN INTERNATIONAL LTD, AY 2004-05 ACT APPEARS TO BE MAD E IN ORDER TO CLARIFY THE REAL INTENTION BEHIND THE INSERTION THEREOF, BY REMOVING THE OBVIOUS HARDSHIP CAUSED TO VARIOUS ASSESSEES WHOSE MAIN BUSINESS IN TRADING IN SHARES. THE AMENDMENT HAS REMOVED THE ANOMALY AND BROUGHT THE AMBIT OF THE EX PLANATION TO SECTION 73 OF THE ACT IN LINE WITH THE INTENTION OF THE LEGISLATURE B Y PLACING THE COMPANIES WHOSE PRINCIPAL BUSINESS IS TRADING IN SHARES AS PART OF THE EXCEPTION TO EXPLANATION TO SECTION 73 OF THE ACT, BECAUSE SUCH COMPANIES WERE NOT THE CO MPANIES FOR WHOM THE EXPLANATION WAS INSERTED. 3.7.2. WE FIND THAT THOUGH THIS AMENDMENT IS MADE E FFECTIVE ONLY FROM ASST YEAR 2015-16 ONWARDS, THE REAL INTENTION BEHIND INTRODUC TION OF THIS AMENDMENT, IN OUR OPINION, IS CURATIVE IN NATURE. IN OUR CONSIDERED O PINION, THE AMENDMENT, IF NOT HELD RETROSPECTIVE, WOULD RESULT IN HARDSHIP TO THE ASSE SSEE IN THE FOLLOWING MANNER:- (A) THE ASSESSEE ENGAGED IN TRADING OF SHARES WOULD BE TREATED AS SPECULATION BUSINESS UPTO ASST YEAR 2014-15. THAT ASSESSEE MIGH T BE HAVING LOSSES ELIGIBLE TO BE CARRIED FORWARD UNDER THE HEAD 'SPECULATION BUSINES S'. (B) THE PROVISIONS OF SECTION 73 OF THE ACT PROVIDES THAT THE BROUGHT FORWARD SPECULATION LOSS COULD BE SET OFF ONLY AGAINST SPEC ULATION PROFITS. (C ) PURSUANT TO THE AMENDMENT BY FINANCE ACT 2014 SUPRA, THE LOSS DERIVED FROM THE PRINCIPAL BUSINESS OF TRADING IN SHARES WOULD NOT B E CONSTRUED AS SPECULATIVE IN NATURE. THE LOGICAL COROLLARY IS PROFIT DERIVED THE REON ALSO WOULD BE TREATED ONLY AS NORMAL BUSINESS PROFITS AND NOT SPECULATIVE PROFITS . (D) IN THIS SITUATION, THE BROUGHT FORWARD SPECULAT ION LOSS COULD NEVER BE ELIGIBLE TO SET OFF AGAINST THE PROFITS WHEN THERE IS ABSOLUTEL Y NO CHANGE IN THE BUSINESS ACTIVITIES OF THE ASSESSEE (I.E TRADING IN SHARES AS ITS PRINC IPAL BUSINESS) . THAT LOSS WOULD GET ITA NO.610/KOL/2017 A.Y. 2008-0 9 LOGVIEW TRADE & CREDIT PVT. LTD. VS. ITO WD-6(2) KOL. PAGE 8 LAPSED FOR NO FAULT OF THE ASSESSEE THEREBY CREATIN G GENUINE HARDSHIP TO THE ASSESSEE. WE FEEL THAT THE INSERTION IN EXPLANATION TO SECTIO N 73 OF THE ACT BY THE FINANCE ACT 2014 SHOULD BE LOOKED INTO FROM THIS PERSPECTIVE W HICH WOULD CREATE GENUINE HARDSHIP TO THE ASSESSEE IF NOT HELD TO BE CURATIVE IN NATURE. HENCE WE HOLD THAT THE SAID AMENDMENT SHOULD BE GIVEN RETROSPECTIVE ITA NO S. 1531 & 1532/KOL/2011 ATN INTERNATIONAL LTD, AY 2004-05 EFFECT ONLY. IN OUR C ONSIDERED OPINION, THE AMENDMENT WOULD NOT SERVE ITS OBJECT IN THE INSTANT CASE UNLE SS IT IS CONSTRUED RETROSPECTIVE IN OPERATION. IN THIS VIEW OF THE MATTER, AND AFTER CONSIDERING THE TOTALITY OF THE FACTS, WE HOLD THAT THE PRINCIPAL BUSINESS OF THE ASSESSEE IS OF SHARE TRADING. THEREFORE, THE IMPUGNED LOSS CANNOT BE TREATED AS SPECULATIVE BY VIRTUE OF THE P ROVISION OF EXPLANATION TO SECTION 73 OF THE ACT. WE REVERSE THE ORDER OF LOWER AUTHOR ITIES AND DIRECT THE AO TO DELETE THE SAME. HENCE, THIS GROUND OF ASSESSEE APPEAL IS ALL OWED. 7. IN THE RESULT, ASSESSEES APPEAL STANDS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 30/08/2017 SD/- SD/- (%&') (!&') (S.S.VISWANETHRA RAVI) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER *DKP-SR.PS )&*+ - 30/08/2017 / KOLKATA / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-LONGVIEW TRADE & CREDIT PVT. LTD. C/O D. J.SHAH & CO. KALYAN BHAV AN 2 ELGIN ROAD, KOLKATA-20 2. /RESPONDENT-ITO WARD-6(2), AAYAKARBHAWAN, P-7, CHOW RINGHEE SQ. KOL-69 3. **, - / CONCERNED CIT 4. - - / CIT (A) 5. ./0 %%, , , / DR, ITAT, KOLKATA 6. 012 / GUARD FILE. BY ORD ER/ & , /TRUE COPY/ SR. PRIVATE SECRETARY, HEAD OF OFFICE/DDO , ,