Magic Share Traders Ltd., Ahmedabad V. The ITO, Ward-2(1)(4), Ahmedabad

ITA 635/AHD/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 1352 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 13-03-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: PARIN SHAH ARS; S N SOPARKAR
• Keywords: Business income; Depreciation; Speculation loss; Unabsorbed depreciation; Speculative transactions; Capital Gains
• Section: 143(3); 43(5); 201; 208

Judgement Text

, B IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER, & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ I.T.A. NO. 635/AHD/2018 ( / ASSESSMENT YEAR: 2014-15) MAGIC SHARE TRADERS LTD. 101, AKASHGANGA BUILDING, NR. GUJARAT COLLEGE ROAD, ELLIS BRIDGE, AHMEDABAD- 380006 / VS. ITO WARD- 2(1)(4) AHMEDABAD ./ ./ PAN/GIR NO. : AAE CM9 542 L ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI S. N. SOPARKAR & PARIN SHAH, ARS / RESPONDENT BY : SHRI MUDIT NAGPAL, SR. DR / DATE OF HEARING 07/08/2019 !'# / DATE OF PRONOUNCEMENT 11/09/2019 $%/ O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A)-6, AHMEDABAD (CIT(A) IN SHORT ), DATED 12.01.2018 ARISING IN THE ASSESSMENT ORDER DATED 1 6.12.2016 PASSED BY THE ASSESSING OFFICER UNDER S. 143(3) OF THE INC OME TAX ACT, 1961 (THE ACT) CONCERNING A.Y. 2014-15. 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE RE ADS AS UNDER:- ITA NO.635/AHD/2018 [MAGIC SHARE TRADERS LTD. VS. ITO] A.Y. 2014-15 - 2 - 1. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN UPHOLDING AND TREATING THE BUSINESS LOSS OF RS. 44,46,409/- FROM FUTURE AND OPTIONS AND RS. 22,89,758/- LOSS FROM EQUITY SHARE TRADING AS SPECULATION LOSS BY APPLYING EXPLANATION TO SECTION 73 OF INCOM E TAX ACT, 1961. IT MAY BE TREATED AS THE BUSINESS LOSS AS CLAIMED B Y THE ASSESSEE AND NOT THE SPECULATION LOSS AS PER ORDER PASSED BY THE LEARNED A.O. AND UPHELD BY THE CIT(A). 2. THE LEARNED CIT(A) HAS ERRED IN NOT CONSIDERING THE VITAL SUBMISSION THAT THE ASSESSEE IS ENGAGED SOLELY IN T HE BUSINESS OF SHARES AND SECURITIES TRADING AND ITS DERIVATIVE PRODUCTS AND THE MUTUAL FUNDS. THE LEARNED CIT(A) SHOULD HAVE CONSI DERED THE SUBMISSION FOR THE SAME AND SHOULD NOT HAVE TREATED THE BUSINESS LOSS AS SPECULATION LOSS. NO SUCH TREATMENT IS CALLED F OR. THE LOSS OF THE APPELLANT FOR FUTURE & OPTIONS AND EQUITY SHARE TRADING BE TREATED AS THE BUSINESS LOSS AND THE ORDER OF THE LEARNED C IT(A) AND LEARNED A.O. BE REVERSED. 3. THE LEARNED CIT(A) SHOULD HAVE CONSIDERED THE FA CTUAL ASPECTS OF THE ASSESSEE AND ALSO THE SUBMISSION MADE BY THE ASSESSEE AND SHOULD NOT HAVE MISPLACED THE RELIANCE ON THE JUDGMENT OF CIT VS. DLF COMMERCIAL DEVELOPERS PVT. LTD. 35TEXMAN.COM 28 0 (PAGE NO 9 OF THE APPEAL ORDER) . THE LOSS OF THE APPELLANT FROM F & O BE TREATED AS THE BUSINESS LOSS AND THE ORDER OF THE LEARNED C IT(A) AND LEARNED A.O. BE REVERSED. 3.1 WHEN THE MATTER WAS CALLED FOR HEARING, THE AR FOR THE ASSESSEE SUBMITTED THAT THE ISSUE TO BE ADDRESSED I S WHETHER A COMPANY DEALING IN DERIVATIVES COULD BE CONSIDERE D AS ENGAGED IN SPECULATIVE BUSINESS BY VIRTUE OF EXPLANATION TO SE C. 73 OR NOT? IN THIS CONTEXT, IT WAS SUBMITTED THAT IDENTICAL ISSUE HAS CROPPED UP IN THE A.YS. 2012-13 AND 2013-14 IN ASESSEES OWN CASE . THE ISSUE IS STATED TO HAVE BEEN SET TO REST BY THE TRIBUNAL IN A.Y. 2012-13 AND HAS BEEN ADJUDICATED IN FAVOUR OF THE ASSESSEE. 3.2 THE LD. DR RELIED UPON THE ORDER OF THE AUTHORI TIES BELOW. 3.3 THE SUBSTANTIVE QUESTION IN CONTROVERSY IS WHET HER LOSS INCURRED IN ELIGIBLE TRANSACTIONS VIZ. DERIVATIVE TRANSACTIONS WITHIN THE MEANING OF PROVISO (D) TO SECTION 43(5) OF THE ACT NOT INVOLVING ANY PURCHASE OR SALE OF SHARES PER SE CAN BE REGARDED AS SPECULATIVE ITA NO.635/AHD/2018 [MAGIC SHARE TRADERS LTD. VS. ITO] A.Y. 2014-15 - 3 - LOSS FOR THE PURPOSES OF SET OFF IN VIEW OF EXPLAN ATION TO SECTION 73 OR NOT? 3.4 THE CO-ORDINATE BENCH OF ITAT IN ITA NO. 770/AH D/2016 CONCERNING A.Y. 2012-13 ORDER DATED 31.10.2018 HAS ADJUDICATED THE ISSUE IN FAVOUR OF THE ASSESSEE. THE RELEVANT OPER ATIVE PARA IS REPRODUCED HEREUNDER:- 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND PERUSED THE RESPECTIVE ORDERS OF THE AO AND CIT(A). THE SUBSTANTIVE QUESTION THAT ARISES FOR ADJUDICATION IS WHETHER LO SS INCURRED IN ELIGIBLE TRANSACTIONS I.E. DERIVATIVE TRANSACTIONS WITHIN THE MEANING OF PROVISO (D) TO SECTION 43(5) OF THE ACT NOT INVO LVING ANY PURCHASE OR SALE OF SHARES PER SE CAN BE REGARDED AS SPECULA TIVE LOSS FOR THE PURPOSES OF SET OFF IN VIEW OF EXPLANATION TO SECTI ON 73 OR NOT. THE CONTROVERSY INVOLVED IN THE PRESENT CASE IS THUS ES SENTIALLY LEGAL IN NATURE. 9.1 IN THE PRESENT APPEAL, THE ASSESSEE SEEKS SET O FF OF LOSSES ARISING FROM DERIVATIVE LOSSES AS NON-SPECULATIVE B USINESS LOSS. IN CONTRAST, THE REVENUE HAS LABELED THE LOSS ARISING FROM DERIVATIVE TRANSACTIONS AS SPECULATIVE LOSS AND HAS CONSEQUE NTLY DENIED SET OFF OF SUCH LOSSES FROM REGULAR INCOME OF NON-SPECULATI VE NATURE ETC. BY APPLYING EXPLANATION TO SECTION 73 OF THE ACT. 9.2 WE FIRST ADVERT TO THE PIVOTAL CONTENTION ON BE HALF OF THE ASSESSEE THAT EXPLANATION TO SECTION 73 OF THE ACT CANNOT APPLY TO LOSS ARISING FROM DERIVATIVE TRANSACTIONS WHICH ARE CATEGORICALLY EXCLUDED FROM BEING REGARDED AS SPECULATIVE BUSINES S AS DEFINED UNDER S.43(5) OF THE ACT READ WITH PROVISO (D) THER ETO. IDENTICAL ISSUE AROSE BEFORE THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF ASIAN FINANCIAL SERVICES (SUPRA) RELIED UPON. THE HON'BLE CALCUTTA HIGH COURT HELD THAT ONCE IT IS DEEMED TO BE A NORMAL BU SINESS LOSS ON THE BASIS OF PROVISO APPENDED TO SECTION 43(5) OF THE A CT, A QUESTION OF APPLYING SECTION 73 OF THE ACT OR THE EXPLANATION T HERETO FOR THE PURPOSES OF REFUSING LOSS TO BE SET OFF AGAINST BUS INESS INCOME IS WHOLLY INCORRECT. THE HON'BLE CALCUTTA HIGH COURT A FTER TAKING NOTE OF THE DECISION OF HON'BLE DELHI HIGH COURT IN DLF COMMERCIAL (SUPRA) TOOK A DISTINCT STAND THAT DERIVATIVES CANN OT BE TREATED AT PAR WITH SHARES FOR THE PURPOSES OF EXPLANATION TO SECT ION 73 OF THE ACT BECAUSE THE LEGISLATURE HAS TREATED IT DIFFERENTLY. THUS, IN VIEW OF THE AFORESAID POSITION ENUNCIATED BY THE HON'BLE HIGH C OURT IN ASIAN FINANCIAL SERVICES (SUPRA), WE FIND GOOD DEAL OF FO RCE IN THE CASE OF ASSESSEE. THE CLAIM OF THE ASSESSEE THUS REQUIRES T O BE ALLOWED ON THIS GROUND ALONE. ITA NO.635/AHD/2018 [MAGIC SHARE TRADERS LTD. VS. ITO] A.Y. 2014-15 - 4 - 9.3 IN VIEW OF THE RESOUNDING CONCLUSION DRAWN IN F AVOUR OF THE ASSESSEE ON THE AFORESAID LEGAL POSITION, WE DO NOT CONSIDER IT NECESSARY TO ADVERT TO OTHER ALTERNATIVE CONTENTION S RAISED ON BEHALF OF THE ASSESSEE. 10. IN THE RESULT, GROUND NO. 1 OF THE ASSESSEES A PPEAL IS ALLOWED. 3.5 THE IDENTICAL ISSUE AGAIN CAME UP IN A.Y. 2013- 14 BEFORE THE CO-ORDINATE BENCH IN ITA NO. 624/AHD/2018 CONCERNIN G A.Y. 2013- 14 WHEREIN THE CO-ORDINATE BENCH IN ITS ORDER DATED 26.06.2019 HAS ENDORSED THE CLAIM OF THE ASSESSEE IN CONTINUITY WI TH THE EARLIER ORDER OF THE CO-ORDINATE BENCH. 3.6 IN CONSONANCE WITH THE VIEW TAKEN IN EARLIER YEARS, THE CLAIM OF THE ASSESSEE TOWARDS ORDINARY BUSINESS LOSS IS A LLOWED IN SO FAR AS THE LOSS FROM DERIVATIVE TRANSACTIONS AMOUNTING TO RS. 44,46,409/- IS CONCERNED. 4. WE NOW ADVERT TO ANOTHER RELATED ISSUE OF ELIGIB ILITY OF SET OFF OF TRADING LOSS OF RS. 22,89,758/- FROM PURCHASE & SALE OF SHARES IN CASH SEGMENT. THE TREATMENT OF LOSS ARISING FROM D ELIVERY BASED PURCHASE & SALE OF SHARES IN THE COURSE OF TRADING STANDS IN VARIANCE WITH LOSS ARISING FROM DERIVATIVE TRANSACTIONS AS ENJOINED BY EXPLANATION TO SEC. 73 OF THE ACT. THIS ASPECT WAS NOT DELIBERATED AT THE TIME OF ORIGINAL HEARING. ACCORDINGLY, THE MAT TER WAS RE-FIXED FOR TAKING NOTE OF THE POINT OF VIEW ON BEHALF OF T HE RESPECTIVE SIDES. 4.1 IN THE CONTEXT OF ALLOWABILITY OF SHARE TRADING LOSS FOR SET OFF UNDER S. 73(1) OF THE ACT, THE LD. SENIOR COUNSEL F OR THE ASSESSEE REFERRED TO THE COMPUTATION OF INCOME AND SUBMITT ED THAT THE INCOME UNDER THE HEAD PROFIT AND GAIN OF BUSINESS STANDS AT A LOSS OF RS. (-) 65.43 LAKHS. THE INCOME REPORTED UNDER THE HEAD CAPITAL GAINS STANDS AT A LOSS OF RS. (-) 8.77 LAKHS. THE INCOME CHARGEABLE ITA NO.635/AHD/2018 [MAGIC SHARE TRADERS LTD. VS. ITO] A.Y. 2014-15 - 5 - UNDER THE HEAD INCOME FROM THE OTHER SOURCES HAS BEEN REPORTED AT RS.72.12 LAKHS. THE LD. SENIOR COUNSEL THUS MADE T WO FOLD SUBMISSIONS; FIRSTLY, THE LONG TERM CAPITAL LOSS OF RS. 8.77 LAKHS HAS BEEN CARRIED FORWARD AND THUS NOT ENTERED INTO COMP UTATION. THAT BEING SO, THE INCOME CHARGEABLE UNDER THE HEAD INC OME OTHER THAN BUSINESS STANDS AT A POSITIVE OF RS. 72.12 LAKHS W HICH IS IN EXCESS OF NEGATIVE FIGURE OF THE PROFIT AND LOSS ACCOUNT A T 65.43 LAKHS. IN THIS SITUATION, IT WAS CONTENDED THAT THE CASE OF T HE ASSESSEE IS COVERED BY ONE OF THE EXCEPTIONS PROVIDED IN THE EX PLANATION TO SEC. 73 AND CONSEQUENTLY THE LOSS ARISING FROM SHARE DEL IVERY TRANSACTIONS IN CASH SEGMENT WOULD BE GOVERNED BY THE PROVISIONS OF SEC. 43(5) ALONE AND EXPLANATION TO SEC. 73 WOULD HAVE NO APPL ICATION. FOR THIS PROPOSITION, THE LD. SENIOR COUNSEL FOR THE AS SESSEE RELIED UPON THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN C IT VS. PARANJAY MERCANTILE LTD. (2014) 43 TAXMAN.COM 193 (GUJ.) AND CIT VS. DARSHAN SECURITIES PVT. LTD. (2019) 18 TAXMAN.COM 1 42 (BOM.). 4.2 SECONDLY, AND THE ALTERNATIVE, THE LD. SENIOR C OUNSEL FOR THE ASSESSEE SUBMITTED THAT THE PRINCIPAL BUSINESS OF THE ASSESSEE COMPANY IS THE BUSINESS OF TRADING IN SHARES AND TH EREFORE THE EXPLANATION TO SEC. 73 WOULD NOT APPLY IN THE LIGHT NEWLY INSERTED EXCEPTION TO THE EXPLANATION. IN ELABORATION, IT W AS POINTED OUT THAT EXPLANATION TO SEC. 73 HAS NO APPLICATION TO THE AS SESSEE WHERE THE PRINCIPAL BUSINESS IS TRADING IN SHARES BY VIRTUE O F AMENDMENT BROUGHT IN BY FINANCE (NO.2) ACT, 2014 W.E.F. 01.04 .2015. THE LD. SENIOR COUNSEL SUBMITTED THAT ALTHOUGH THE AMENDMEN T HAS BEEN BROUGHT W.E.F. 01.04.2015, THAT IS, A.Y. 2015-16, T HE AMENDMENT BEING CURATIVE IN NATURE IS APPLICABLE WITH RETROSP ECTIVE EFFECT FOR EARLIER YEARS AS WELL. RELIANCE WAS PLACED ON THE DECISION OF CO- ORDINATE BENCH IN THE CASE OF FIDUCIARY SHARES AND STOCK PVT. LTD. ITA NO.635/AHD/2018 [MAGIC SHARE TRADERS LTD. VS. ITO] A.Y. 2014-15 - 6 - 159 ITD 554 (MUM.) FOR RETROSPECTIVE APPLICATION OF THE AMENDMENT. THE LD. SENIOR COUNSEL THUS SUBMITTED THAT IN THE L IGHT OF ALTERNATIVE CONTENTION AS WELL, THE EXPLANATION TO SEC. 73 HAS NO APPLICATION TO LOSS ARISING FROM DELIVERY BASED TRANSACTIONS IN CA SH SEGMENTS AS WELL. THE LD. SENIOR COUNSEL THUS SUBMITTED THAT T HERE IS NO JUSTIFIABLE REASON TO HOLD THE LOSS FROM TRADING IN SHARES TO BE SPECULATIVE LOSS AND CONSEQUENTLY DENY THE SET OF F OF SUCH ORDINARY BUSINESS LOSS AS PER THE NORMAL PROVISIONS ACT. 4.3 THE LD. DR, ON THE OTHER HAND, RELIED UPON THE ORDER OF THE LOWER AUTHORITIES AND SUBMITTED THAT DERIVATIVE TRA NSACTIONS HAVE BEEN EXCLUDED FROM THE DEFINITION OF SPECULATIVE TR ANSACTION AS PER THE EXPRESS PROVISO (D) TO S. 43(5) OF THE ACT. BU T, HOWEVER, THE LOSS ARISING FROM SHARE TRADING IN CASH SEGMENT WOULD CO NTINUE TO BE GOVERNED BY THE OVER-RIDING LEGAL FICTION CONTEMPLA TED IN EXPLANATION TO SEC. 73 OF THE ACT AS APPLICABLE TO COMPANY ASSESSEES. THE LD. DR THUS SUBMITTED THAT THE SAME TREATMENT AS GIVEN TO THE DERIVATIVE LOSSES CANNOT BE MET IN S O FAR AS LOSS FROM TRADING IN SHARES ARISING IN THE CASH SEGMENT IS CO NCERNED. 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. THE ISSUE UNDER CONSIDERATION IS WHETHER LOSS ARISING FROM DE LIVERY BASED TRADING IN SHARES IS COVERED BY CERTAIN EXCEPTIONS PROVIDED IN EXPLANATION TO SEC. 73 OR NOT AND CONSEQUENTIALLY, WHETHER THE LOSS FROM SHARE TRADING IS TO BE REGARDED AS NON-SPECULA TIVE BUSINESS LOSS FOR THE PURPOSES OF SET OFF UNDER SEC. 72 AND SEC. 73 OF THE ACT. 5.1 EXPLANATION TO SEC. 28 OF THE ACT PROVIDES THAT WHERE SPECULATIVE TRANSACTIONS CARRIED ON BY AN ASSESSEE ARE OF SUCH A NATURE AS TO CONSTITUTE A BUSINESS, THE BUSINESS (H EREINAFTER REFERRED TO AS SPECULATIVE BUSINESS) SHALL BE DEEMED TO BE DISTINCT AND ITA NO.635/AHD/2018 [MAGIC SHARE TRADERS LTD. VS. ITO] A.Y. 2014-15 - 7 - SEPARATE FROM ANY OTHER BUSINESS. THIS CLASSIFICAT ION BECOMES PERTINENT BECAUSE SEC. 73 PROVIDES THAT LOSS IN SPE CULATION BUSINESS (UNLIKE OTHER BUSINESS), CANNOT BE SET OFF AGAINST THE PROFITS OF ANY BUSINESS OTHER THAN A SPECULATION BUSINESS. LIKEWI SE, A LOSS IN SPECULATION BUSINESS CARRIED FORWARD TO A SUBSEQUEN T YEAR CAN BE SET OFF ONLY AGAINST THE PROFIT AND GAINS OF ANY SPECUL ATIVE BUSINESS IN THE SUBSEQUENT YEAR. HENCE, THERE IS A PERCEPTIBLE DIFFERENCE IN TAX TREATMENT TO LOSSES ARISING FROM SPECULATIVE BUSINE SS AND NON- SPECULATIVE BUSINESS. PROFITS AND LOSSES RESULTING FROM SPECULATIVE TRANSACTION MUST, THEREFORE, BE TREATED AS SEPARATE AND DISTINCT FROM ORDINARY PROFITS AND GAINS OF BUSINESS AND PROFESSI ON. 5.2 AT THIS JUNCTURE, WE FURTHER NOTE THAT SEC. 43( 5) DEFINES SPECULATIVE TRANSACTION WHICH DEFINITION, OF COUR SE, IS FOR THE PURPOSES OF SECTIONS 28 TO 41. AS PER THE SAID PRO VISION, SPECULATIVE TRANSACTION MEANS THE TRANSACTION IN WHICH CONTRACT FOR PURCHASE OR SALE OF ANY COMMODITY, INCLUDING STOCKS AND SHARES, IS PERIODICALLY OR ULTIMATELY SETTLED OTHERWISE THAN B Y THE ACTUAL DELIVERY OR TRANSFER OF THE COMMODITY OR SCRIPS. I N TERMS OF PROVISIONS OF SEC. 43(5), THE BUSINESS OF THE ASSES SEE IN DELIVERY BASED TRADING IN SHARES WOULD NOT BE REGARDED AS SP ECULATIVE BUSINESS. EVEN THE REVENUE DOES NOT CONTEND THAT T HE SET OFF OF LOSS FROM SHARE TRADING IS NOT PERMISSIBLE UNDER SUB-SEC TION (1) OF SEC. 73 BUT FOR THE EXPLANATION WHICH IS ADDED AT THE END OF THE SECTION. 5.3 SEC. 73 DEALS WITH LOSSES INCURRED BY AN ASSESS EE IN HIS SPECULATION BUSINESS. LOSSES COMPUTED IN RESPECT O F SPECULATION BUSINESS IS NOT ALLOWED TO BE SET OFF AGAINST INCOM E OTHER THAN SPECULATION INCOME. FROM THE PLAIN READING OF THE EXPLANATION TO SEC. 73, IT CAN BE SEEN THAT THE EXPLANATION HAS IN TRODUCED A DEEMED ITA NO.635/AHD/2018 [MAGIC SHARE TRADERS LTD. VS. ITO] A.Y. 2014-15 - 8 - FICTION BY WHICH LOSS ARISING FROM ANY PART OF BUSI NESS OF COMPANY COMPRISING OF PURCHASE OF SALE AND SHARES OF OTHER COMPANIES SHALL BE REGARDED AS SPECULATIVE LOSS REGARDLESS OF DEL IVERY OCCURRED. THE TEST OF SETTLEMENT OF TRANSACTION ENTERED BY DE LIVERY AS PROVIDED UNDER S. 43(5) IS THUS LOST WHERE THE EXPLANATION S . 73 APPLIES IN COMPANY ASSESSEES. CONSEQUENTLY, SUCH LOSS ON SALE OF SHARES SHALL NOT BE PERMITTED TO BE SET OFF EXCEPT PROFIT AND GA INS ARISING FROM SPECULATIVE BUSINESS. PERTINENT TO SAY, THE EXPLAN ATION COVERS ONLY SHARES AND NOT OTHER GOODS OR COMMODITIES ETC. AND APPLICABLE TO ONLY COMPANY ASSESSEES. TWO EXCEPTIONS WERE PROVID ED FOR NON- APPLICABILITY OF THE EXPLANATION TO SEC. 73(1) OF T HE ACT PRIOR TO AMENDMENT BROUGHT IN BY FINANCE (NO. 2) ACT, 2014 W .E.F. 01.04.2015. FIRST EXCEPTION REFERS TO COMPOSITION OF GROSS TOTAL INCOME (GTI). AS PER THIS EXCEPTION, EXPLANATION S HALL NOT APPLY WHERE THE AGGREGATE INCOME UNDER WHICH NON-BUSINESS HEADS (INTEREST ON SECURITIES, INCOME FROM HOUSE PROPE RTY, CAPITAL GAINS AND INCOME FROM OTHER SOURCES) EXCEEDS INC OME TAXABLE UNDER WHICH HEAD BUSINESS INCOME. AS PER THE SECON D EXCEPTION, THE EXPLANATION WOULD ALSO NOT APPLY WHERE THE PRINCIPA L BUSINESS OF THE COMPANY IS OF BANKING OR GRANTING OF LOANS AND ADVA NCES. A THIRD EXCEPTION HAS BEEN INSERTED BY FINANCE (NO. 2) ACT, 2014 W.E.F. 01.04.2015 WHEREBY A COMPANY WHOSE PRINCIPAL BUSINE SS IS TRADING IN SHARES WOULD ALSO FALL WITHIN THE BENEFICIAL EXC EPTION AND CONSEQUENTIALLY LOSS ARISING FROM DELIVERY BASED TR ADING IN SHARES OF SUCH COMPANIES WOULD BE REGARDED AS NON-SPECULATIVE BUSINESS AS PER ORDINARY PROVISIONS. 5.4 IT IS THE CLAIMED ON BEHALF OF THE ASSESSEE THA T THE CASE OF THE ASSESSEE FALLS IN FIRST EXCEPTION AS WELL AS THIRD EXCEPTION NOTED ABOVE. IT IS CONTENDED THAT THE PROFITS ARISING FR OM NON-BUSINESS ITA NO.635/AHD/2018 [MAGIC SHARE TRADERS LTD. VS. ITO] A.Y. 2014-15 - 9 - HEADS (INCOME FROM OTHER SOURCES 72.12 LAKHS) EXCEE DS THE NEGATIVE INCOME (LOSS RS. 65.43 LAKHS) REPORTED UNDER THE HE AD BUSINESS INCOME. IT IS CONTENTION ON BEHALF OF THE ASSESSE E THAT LOSS UNDER THE HEAD CAPITAL GAINS (8.77 LAKHS) CANNOT BE CLUBB ED WITH INCOME FROM OTHER SOURCE AS THE SAME HAS BEEN CARRIED FORW ARD AND DO NOT ENTER INTO COMPUTATION AT ALL. WE DO NOT SEE ANY S UBSTANCE IN SUCH LINE OF ARGUMENT ON FACTS. THE INCOME FROM OTHER S OURCES (AFTER SET OFF UNABSORBED DEPRECIATION) HAS BEEN REPORTED TO B E NIL AS PER THE COMPUTATION OF INCOME PROVIDED. THUS, THE BUSINESS LOSS CLEARLY EXCEEDS THE AGGREGATE OF INCOME/LOSS ARISING UNDER NON-BUSINESS HEADS. THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF EASTERN AVIATION AND INDUSTRIES LTD. VS. CIT 208 ITR 1023 H AS HELD THAT THE EXPRESSION INCOME OR PROFITS AND GAINS SHOULD B E UNDERSTOOD AS INCLUDING LOSS ALSO SO THAT IN ONE SENSE PROFITS AND GAINS REPRESENT POSITIVE INCOME WHEREAS LOSSES REPRESENT NEGATIVE I NCOME. THE HONBLE HIGH COURT THUS OBSERVED THAT WHILE JUDGING THE RELATIVE COMPOSITION OF GTI, ONE HAS TO CONSIDER THE ABSOLUT E QUANTUM OF LOSS AS AGAINST THE OTHER POSITIVE INCOME. AS PER THE DECISION, WHAT ONE NEEDS TO CONSIDER AND COMPARE ARE THE RELATIVE FIGURES OF LOSS AND INCOME. THE RATIO WHEN APPLIED, THE CHARGEABLE AMOUNT UNDER THE HEAD BUSINESS INCOME FAR EXCEEDS THE CHARGEAB LE AMOUNT AGGREGATED UNDER NON-BUSINESS HEAD. THUS, THE SHEL TER IN THE FORM OF FIRST EXCEPTION IS NOT AVAILABLE TO THE ASSESSEE . 5.5 THE ALTERNATIVE CONTENTION THAT THE BUSINESS OF THE ASSESSEE BEING MAINLY TRADING IN SHARES AND THUS COVERED UND ER THIRD EXCEPTION IN VIEW OF THE CLARIFICATORY AMENDMENT BY FINANCE (NO. 2) ACT 2014 IS ALSO APPARENTLY BEREFT OF ANY MERITS. THE INTERPRETATION GIVEN BY THE CO-ORDINATE BENCH IN FIDUCIARY SHARES AND STOCKS AND PVT. LTD. (2016) 159 ITD 554 (MUM.) IS NO LONGER A GOOD LAW IN ITA NO.635/AHD/2018 [MAGIC SHARE TRADERS LTD. VS. ITO] A.Y. 2014-15 - 10 - VIEW OF THE RECENT DECISION RENDERED BY HONBLE SUP REME COURT IN THE CASE SNOWTEX INVESTMENT LTD. VS. PCIT JUDGMENT DATED 24.06.2019. HONBLE SUPREME COURT IN THE AFORESAID JUDGMENT HAS HELD THAT AMENDMENT TO EXPLANATION SEC. 73 BY FINAN CE (NO. 2) ACT 2014 W.E.F. 01.04.2015 IS NOT CLARIFICATORY OR RETR OSPECTIVE. THE VIEW EXPRESSED BY THE CO-ORDINATE BENCH IS THUS OVE RTURNED. CONSEQUENTLY, LOSS OCCURRED TO THE ASSESSEE AS A RE SULT OF ITS ACTIVITY OF TRADING IN SHARES IS A LOSS ARISING FROM BUSINES S OF SPECULATION AND IS NOT CAPABLE OF BEING SET OFF AGAINST THE PROFITS WHICH IT HAD EARNED FROM NON-SPECULATIVE BUSINESS. 6. WE THUS FIND NO INFIRMITY IN THE ORDER OF THE CI T(A) TO THE EXTENT IT HAS CONCLUDED THAT LOSS AMOUNTING TO RS. 22,89,758/- ARISING FROM TRANSACTIONS OF PURCHASE AND SALE OF S HARES AS SPECULATION LOSS FOR THE PURPOSES OF SEC. 73 OF T HE ACT. THE CASE MADE OUT BY THE ASSESSEE THAT SUCH LOSS SHOULD BE T REATED AS NON- SPECULATIVE BUSINESS LOSS AS PER ITS CLAIM IS THUS WITHOUT ANY FORCE. WE DECLINE TO INTERFERE WITH THE ORDER OF THE CIT(A ) TO THIS EXTENT. 7. BEFORE WE CONCLUDE, IT MAY BE PERTINENT TO NOTE THAT THE ASSESSEE HAS INTER ALIA REFERRED TO THE DECISION OF THE CO-ORDINATE BENCH CONCERNING A.Y. 2013-14 IN ITS OWN CASE WHERE LOSS OF RS. 2,46,403/- ARISING FROM TRADING IN EQUITY SHARES WA S ALSO REGARDED AS NON-SPECULATIVE BUSINESS LOSS. WE FIND THAT THE DE CISION RENDERED BY THE CO-ORDINATE BENCH IN 2013-14 IS SIMPLY MADE ON THE BASIS OF DECISION RENDERED CONCERNING A.Y. 2012-13 WHERE THE FACT SITUATION WAS CONVERSE AND ALTOGETHER DIFFERENT. IN A.Y. 201 2-13 THERE WAS A POSITIVE INCOME FROM SHARE TRADING ACTIVITY WITH NO FETTERS AND THEREFORE SEC. 73(1) DID NOT COME INTO PLAY AT THE FIRST INSTANCE. WE ARE ALSO NOT PRIVY TO THE RELEVANT FACTS AND COMPOS ITION OF GROSS TOTAL ITA NO.635/AHD/2018 [MAGIC SHARE TRADERS LTD. VS. ITO] A.Y. 2014-15 - 11 - INCOME CONCERNING A.Y. 2013-14 AND THEREFORE IT WIL L BE IMPRUDENT TO ADOPT A SWEEPING CONCLUSION DRAWN IN A.Y. 2013-1 4 IGNORING THE PECULIAR FACTS OF THE PRESENT CASE AND PROVISIONS O F LAW. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. SD/- SD/- (MAHAVIR PRASAD) (PRADIP KUMA R KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 11/09/2019 TANMAY TRUE COPY !' #' / COPY OF ORDER FORWARDED TO:- 1. / REVENUE 2. $ / ASSESSEE 3. ) *+ , / CONCERNED CIT 4. ,- / CIT (A) 5. 012 33*+, *+#, 56$)$ / DR, ITAT, AHMEDABAD 6. 289 : / GUARD FILE. BY ORDER / $% , ;/5 *+#, 56$)$ < 1.DATE OF DICTATION ON 18.07.2019 & 08.08.2019 & 14.08.2019 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING MEMBER 14.08.2019 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 19.08.2019 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 11.09.2019 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR . P.S./P.S 11.09.2019 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 11.09.2019 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER THIS ORDER PRONOUNCED IN OPEN COURT ON 1 1/09/2019