AMOL CAPITAL MARKETS PRIVATE LIMITED, MUMBAI V. ITO 4(1)(1), MUMBAI

ITA 783/MUM/2019

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 7349 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 12-02-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MICHAEL JERALDLD
• Assessee Lawyers: VENUGOPAL C NAIRLD
• Keywords: Business income; Transactions in derivatives; Retrospective amendment; Speculation loss; Futures and options; Speculative transactions; Capital Gains
• Section: 143(3); 43(5)

Judgement Text

1 ITA NO.783/MUM/2019 AMOL CAPITAL MARKETS PVT. LTD. ASSESSMENT YEAR-2014-15 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI , , BEFORE SHRI SAKTIJIT DEY, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.783/MUM/2019 ( / ASSESSMENT YEAR:2014-15) M/S. A MOL CAPITAL MARKETS PVT. LTD. A-106, MOTALIBAI WADIA BLDG. 22-D SA BRELVI STREET ROAD FORT, MUMBAI-400 001. / VS. INCOME TAX OFFICER - 4 (1)(1) ROOM NO.636, AAYKAR BHAVAN M.K. ROAD, MUMBAI-400 020. !' ./ ./PAN/GIR NO. AADCS-8022-N ( '$ /APPELLANT ) : ( %&'$ / RESPONDENT ) ASSESSEE BY : SHRI VENUGOPAL C. NAIR-LD. AR REVENUE BY : SHRI MICHAEL JERALD-LD.DR / DATE OF HEARING : 17/10/2019 / DATE OF PRONOUNCEMENT : 17/10/2019 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER):- 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [IN SHORT REFERRED TO AS AY] 2014-15 CONTEST THE ORDER OF COMMISSION ER OF INCOME-TAX (APPEALS)-9, MUMBAI, [IN SHORT REFERRED TO AS CIT( A)], APPEAL NO. CIT(A)- 9/CIR.4/324/2016-17 DATED 28/01/2019 ON FOLLOWING GROUNDS OF APPEAL: - 2 ITA NO.783/MUM/2019 AMOL CAPITAL MARKETS PVT. LTD. ASSESSMENT YEAR-2014-15 1. THE LEARNED CIT(A) ERRED IN FACTS AND CIRCUMSTA NCES IN CONFIRMING ACTION OF AO WHO DENIED SET OFF OF PROFIT ON F&O TRANSACTIONS AND PR OFITS ON NON-DELIVERY-BASED SHARES AGAINST BROUGHT FORWARD BUSINESS LOSS. 2. REASONS GIVEN BY LEARNED CIT(A)-9 FOR CONFIRM ING THESE ADDITIONS ARE WRONG, INSUFFICIENT AND CONTRARY TO FACTS AND EVIDENCE ON RECORD AND IN LAW. WE HAVE HEARD AND CONSIDERED THE RIVAL SUBMISSIONS AND APPLIED OUR MIND TO JUDICIAL PRONOUNCEMENTS AS CITED BEFORE US. 2.1 FACTS ON RECORD WOULD REVEAL THAT ASSESSEE BEI NG RESIDENT CORPORATE ASSESSEE STATED TO BE ENGAGED AS SHARE AND STOCK BR OKER WAS ASSESSED FOR YEAR UNDER CONSIDERATION U/S. 143(3) ON 15/12/2 016 WHEREIN THE INCOME OF THE ASSESSEE WAS DETERMINED AT RS.51.00 LACS AFT ER CERTAIN ADJUSTMENTS AS AGAINST NIL RETURN E-FILED BY THE ASSESSEE ON 25/09/2014. 2.2 THE ASSESSEE MADE AN APPLICATION FOR DIRECTION U/S 144A FOR SETTING- OFF OF BUSINESS INCOME AGAINST BROUGHT FORWARD BUSI NESS LOSSES OF EARLIER YEARS WHICH WERE ARISING OUT OF F & O TRANSACTIONS. THE LD. ADDITIONAL CIT DIRECTED LD. AO TO FOLLOW THE PROVISIONS OF SEC 73 FOR SETTING-OFF OF CARRIED FORWARD LOSSES FROM SPECULATION BUSINESS AGAINST CU RRENT YEARS PROFITS FROM SPECULATION BUSINESS AS DEFINED IN SEC 43(5) OF THE ACT. HOWEVER, IN THE ABSENCE OF DETAILS OF SPECULATION PROFITS OF CURREN T YEAR U/S 43(5) R.W.S. 73, THE ASSESSEES CLAIM FOR SET-OFF OF BROUGHT FORWARD BUSINESS LOSSES WAS DENIED. 3. BEFORE LD. CIT(A) THE ASSESSEE CONTENDED THAT AM ENDMENT IN EXPLANATION TO SECTION 73, BEING CLARIFICATORY & CU RATIVE IN NATURE, WOULD ENTITLE THE ASSESSEE TO CLAIM THE SAID SET-OFF. HOW EVER, LD. CIT(A), RELYING UPON THE DECISION OF THIS TRIBUNAL RENDERED IN ITO V/S ARANDI INVESTMENT 3 ITA NO.783/MUM/2019 AMOL CAPITAL MARKETS PVT. LTD. ASSESSMENT YEAR-2014-15 PVT. LTD. ITA NO.2330/MUM/2016 ORDER DATED 05/01/20 18 UPHELD THE STAND OF LD. AO. THE SAID DECISION HELD THAT COMPAN IES ENGAGED IN THE BUSINESS OF TRADING IN SHARES WERE TAKEN OUT OF THE AMBIT OF EXPLANATION TO SECTION 73 ONLY WITH EFFECT FROM 01/04/2015 AS HELD BY HONBLE CALCUTTA HIGH COURT IN THE CASE OF PR.CIT V/S SNOWTEX INVESTMENT LTD. (GA NO. 1695 OF 2016) AND THE SAME DO NOT APPLY RETROSPECTIVELY. AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4. UPON DUE CONSIDERATION, WE FIND THAT LEARNED FIR ST APPELLATE AUTHORITY, WHILE ADJUDICATING THE ISSUE HAS RELIED UPON THE DE CISION OF THIS TRIBUNAL RENDERED IN ITO V/S ARANDI INVESTMENT PVT. LTD. (SUPRA) WHICH IN TURN PRIMARILY RELIED UPON THE RATIO LAID DOWN BY HONBL E CALCUTTA HIGH COURT IN PR.CIT V/S SNOWTEX INVESTMENT LTD. WE FIND THAT THIS DECISION OF HONBLE HIGH COURT HAS FINALLY BEEN UPHELD BY HONBLE SUPRE ME COURT IN SNOWTEX INVESTMENT LTD. V/S PR. CIT (105 TAXMANN.COM 282 30 /04/2019) WHEREIN THE ISSUE HAS BEEN SETTLED AS UNDER: - 14. THE PROVISIONS OF SECTION 43(5) WERE AMENDED BY TH E FINANCE ACT, 2005. PRIOR TO THE AMENDMENT, SECTION 43(5) DEFINED A 'SPECULATIVE TRA NSACTION' TO MEAN A TRANSACTION IN WHICH A CONTRACT FOR THE PURCHASE OR THE SALE OF ANY COMMOD ITY INCLUDING STOCKS AND SHARES IS SETTLED OTHERWISE THAN BY THE ACTUAL DELIVERY OR TRANSFER O F THE COMMODITY OR SCRIPS. THE IMPACT OF THE AMENDMENT BY THE FINANCE ACT, 2005 WAS THAT AN ELIG IBLE TRANSACTION ON A RECOGNISED STOCK EXCHANGE IN RESPECT OF TRADING IN DERIVATIVES WAS D EEMED NOT TO BE A SPECULATIVE TRANSACTION. WITH EFFECT FROM 1 APRIL 2006, TRADING IN DERIVATIVES WA S BY A DEEMING FICTION NOT REGARDED AS A SPECULATIVE TRANSACTION WHEN IT WAS CARRIED OUT ON A RECOGNIZED STOCK EXCHANGE. 15. THE CIRCULAR OF THE CBDT DATED 27 FEBRUARY 2006 IND ICATED THAT THIS AMENDMENT WAS OCCASIONED BY THE CHANGES WHICH WERE INTRODUCED BY SEBI BOTH AT THE LEGAL AND TECHNOLOGICAL LEVEL FOR BRINGING IN GREATER TRANSPARENCY IN THE MARKET FOR DERIVATIVES. EXPLAINING THE REASON FOR THE AMENDMENT, THE CIRCULAR STATES: '3.10 EXCLUDING 'TRADING IN DERIVATIVES' ON RECOGNISED ST OCK EXCHANGES FROM THE AMBIT OF 'SPECULATIVE TRANSACTIONS' 4 ITA NO.783/MUM/2019 AMOL CAPITAL MARKETS PVT. LTD. ASSESSMENT YEAR-2014-15 EXISTING PROVISIONS OF CLAUSE (5) OF SECTION 43 DEF INE 'SPECULATIVE TRANSACTION' TO MEAN A TRANSACTION IN WHICH A CONTRACT FOR THE PURCHASE OR SALE OF ANY COMMODITY INCLUDING STOCKS AND SHARES IS SETTLED OTHERWISE THAN BY THE ACTUAL DELIVERY OR TRANSFER O F THE COMMODITY OR SCRIPS. THE PROVISO TO SECTION 43(5) LISTS OUT CERTAIN TRANSACTIONS WHICH ARE NOT DEEMED TO BE SPECULATIVE TRANSACTIONS. SYSTEMIC AND TECHNOLOGICAL CHANGES INTRODUCED BY SE BI HAVE RESULTED IN SUFFICIENT TRANSPARENCY IN THE STOCK MARKETS AND HAVE TO A LARGE EXTENT CURBED THE SCOPE FOR GENERATING FICTITIOUS LOSSES THROUGH ARTIFICIAL TRANSACTIONS OR SHIFTING OF INCI DENCE OF LOSS FROM ONE PERSON TO ANOTHER. THE SCREEN BASED COMPUTERIZED TRADING PROVIDES FOR AUDI T TRAIL. IN THE WAKE OF THESE DEVELOPMENTS, THE PRESENT DISTINCTION BETWEEN SPECULATIVE AND NON-SPE CULATIVE TRANSACTIONS, IN RESPECT OF TRADING IN DERIVATIVES OF SECURITIES IS LOSING RELEVANCE. THE FINANCE ACT, 2005 HAS, ACCORDINGLY, AMENDED SEC TION 43(5) TO PROVIDE THAT AN ELIGIBLE TRANSACTION IN RESPECT OF TRADING IN DERIVATIVES OF SECURITIES CARRIED OUT ON A RECOGNISED STOCK EXCHANGE SHALL NOT BE DEEMED AS SPECULATIVE TRANSAC TION. THE NOTIFICATION PRESCRIBING THE RULES AND THE CONDITIONS TO BE FULFILLED BY A STOCK EXCHANGE TO BE RECOGNIZED BY THE CENTRAL GOVERNMENT FOR THE PURPOSES OF SECTION 43(5) [I.E., RULES 6DDA AND 6DDB OF THE INCOME-TAX RULES, 1962] HAS BEEN PUBLISHED IN THE OFFICIAL GAZETTE ON 1 ST JULY, 2005 VIDE S. O. NO. 932(E). APPLICABILITY: FROM A.Y. 2006-07 ONWARDS.' 16. SECTION 73 DEALS WITH LOSSES FROM SPECULATION BUSI NESS. UNDER SUB-SECTION (1) OF SECTION 73, A LOSS COMPUTED IN RELATION TO SPECULATION BUSINESS C ARRIED ON BY AN ASSESSEE CAN ONLY BE SET OFF AGAINST THE PROFITS AND GAINS OF ANOTHER SPECULATIO N BUSINESS. THE EXPLANATION TO SECTION 73 CONTAINS A DEEMING FICTION WHERE CERTAIN BUSINESSES SHALL, FOR THE PURPOSES OF THE SECTION, BE DEEMED TO BE SPECULATION BUSINESSES. THE EXPLANATIO N ALSO CARVES OUT AN EXCEPTION IN RESPECT OF CERTAIN SPECIFIED BUSINESSES WHICH SHALL LIE OUTSID E THE FOLD OF THE DEEMING FICTION. PRIOR TO THE AMENDMENT OF THE EXPLANATION BY THE FINANCE (NO. 2) ACT 2014 WITH EFFECT FROM 1 APRIL 2015, THE BUSINESS OF TRADING IN SHARES CARRIED ON BY A COMPA NY WAS NOT EXCLUDED FROM ITS PURVIEW. HOWEVER, BY THE AMENDMENT WHICH WAS BROUGHT INTO FORCE FROM 1 APRIL 2015, THE EXPLANATION TO SECTION 73 READS AS FOLLOWS: ' EXPLANATION - WHERE ANY PART OF THE BUSINESS OF A COMPANY (OTH ER THAN A COMPANY WHOSE GROSS TOTAL INCOME CONSISTS MAINLY OF INCOME WHICH IS CHA RGEABLE UNDER THE HEADS 'INTEREST ON SECURITIES', 'INCOME FROM HOUSE PROPERTY', 'CAPITAL GAINS' AND ' INCOME FROM OTHER SOURCES', OR A COMPANY THE PRINCIPAL BUSINESS OF WHICH IS THE BUSINESS OF TRAD ING IN SHARES OR BANKING OR THE GRANTING OF LOANS AND ADVANCES) CONSISTS IN THE PURCHASE AND SALE OF SHARES OF OTHER COMPANIES, SUCH COMPANY SHALL, FOR THE PURPOSES OF THIS SECTION, BE DEEMED TO BE C ARRYING ON A SPECULATION BUSINESS TO THE EXTENT TO WHICH THE BUSINESS CONSISTS OF THE PURCHASE AND SAL E OF SUCH SHARES.' 17. WHILE ON THE ONE HAND, PARLIAMENT AMENDED SECTION 43(5) WITH EFFECT FROM 1 APRIL 2006 AS A RESULT OF WHICH TRADING IN DERIVATIVES ON RECOGNISE D STOCK EXCHANGES FELL OUTSIDE THE PURVIEW OF THE BUSINESS OF SPECULATION, A CORRESPONDING AMENDMENT TO THE EXPLANATION TO SECTION 73 IN RESPECT OF TRADING IN SHARES WAS BROUGHT IN ONLY WITH EFFECT F ROM 1 APRIL 2015. 18. THE SUBMISSION WHICH HAS BEEN URGED ON BEHALF OF T HE APPELLANT IS THAT THERE WAS NO LOGICAL REASON TO EXCLUDE FROM THE PURVIEW OF SPECULATION B USINESS, TRADING IN SHARES, WHEREAS TRADING IN 5 ITA NO.783/MUM/2019 AMOL CAPITAL MARKETS PVT. LTD. ASSESSMENT YEAR-2014-15 DERIVATIVES WAS EXCLUDED, AS WE HAVE SEEN, FROM THE AMBIT OF SECTION 43(5) AFTER 1 APRIL 2006. WE WILL CONSIDER THIS ASPECT OF THE ALTERNATIVE SUBMIS SION SUBSEQUENTLY. 19. AT THIS STAGE, WE WILL DEAL WITH THE FIRST SUBMISS ION WHICH IS THAT THE EXPLANATION TO SECTION 73, AS IT STOOD PRIOR TO THE AMENDMENT, EXCLUDED FROM T HE DEEMING DEFINITION OF A SPECULATION BUSINESS, A SITUATION WHERE THE PRINCIPAL BUSINESS OF A COMPA NY WAS GRANTING OF LOANS AND ADVANCES. 20. IN THE PRESENT CASE, THERE IS NO DISPUTE ABOUT THE FACT THAT THE ASSESSEE WAS REGISTERED AS AN NBFC UNDER THE PROVISIONS OF THE RESERVE BANK OF IN DIA ACT, 1934. SECTION 73(1) DOES NOT DEFINE SPECIFICALLY, THE CIRCUMSTANCES IN WHICH THE PRINCI PAL BUSINESS OF A COMPANY WOULD BE REGARDED AS A BUSINESS OF THE SPECIFIED DESCRIPTION. IN THE PRESE NT CASE, THE PRINCIPAL BUSINESS WAS URGED TO BE THE GRANTING OF LOANS AND ADVANCES. WE CANNOT ACCEPT TH IS SUBMISSION AND ARE OF THE VIEW THAT THE HIGH COURT WAS JUSTIFIED IN REJECTING IT. THE CIRCUMSTAN CE, WHICH IN OUR VIEW IS OF CRUCIAL SIGNIFICANCE, I S HOW THE ASSESSEE CONSTRUED ITS OWN LINE OF BUSINESS . THE HIGH COURT HAS EXTRACTED WHAT THE ASSESSEE STATED BEFORE THE ASSESSING OFFICER NAMELY : ' IN OUR CASE THE SHARE TRADING IS OUR SOLE BUS INESS DURING THE ASSESSMENT YEAR UNDER CONCERN'. FROM THE ABOVE STATEMENT OF THE ASSESSEE, IT IS EVI DENT THAT THE ASSESSEE ITSELF STATED THAT SHARE TRADING WAS ITS SOLE BUSINESS DURING THE ASSESSMENT YEAR IN QUESTION I.E. A.Y. 2008-2009. 21. MR. R.V. EASWAR, LEARNED SENIOR COUNSEL SUBMITS TH AT WHILE THE ASSESSEE DID MAKE THIS STATEMENT BEFORE THE ASSESSING OFFICER, IT SHOULD NOT BE REGA RDED AS CONCLUSIVE. IT WAS URGED THAT THE SUBMISSION OF THE ASSESSEE WAS ALSO REJECTED ON THE BASIS THAT WHILE IT HAD RECEIVED INTEREST ON LOANS OF RS 2.21 LAKHS, IT HAD PAID OUT INTEREST OF RS 62 .84 LAKHS. THE SUBMISSION IS THAT, IT IS NOT MERELY THE RECEIPT OF INTEREST ON LOANS AND ADVANCES, BUT THE DEPLOYMENT OF FUNDS WHICH SHOULD HAVE A BEARING IN DETERMINING THE PRINCIPAL NATURE OF THE BUSINESS. IN THIS CONTEXT, RELIANCE WAS PLACED ON THE VIEW TAKEN BY A DIVISION BENCH OF THE CALCUTTA HIGH COURT IN CIT V. SAVI COMMERCIAL (P.) LTD. [2015] 60 TAXMANN.COM 295/233 TAXMAN 289/373 ITR 24 3. THE HIGH COURT, WHILE DEALING WITH THE PROVISIONS OF THE EXPLANATION TO SECTION 73, OBSERVED THAT INCOME ALONE CANNOT B E TAKEN INTO ACCOUNT AND WHERE THE ACTIVITY OF GRANTING LOANS AN D ADVANCES 'IS ON A LARGER SCALE THAN THE BUSINESS OF BUYING AND SELLING SHARES' THAT WOULD BE AN IMPO RTANT INDICATOR. IN OTHER WORDS, IT WAS HELD THAT PROFIT ALONE CANNOT BE MADE A DISTINCTIVE FACTOR. 22. THE CORRECTNESS OF THIS ASPECT OF THE SUBMISSION W HICH HAS BEEN URGED BY LEARNED SENIOR COUNSEL NEED NOT BE DETERMINED IN THE FACTS OF THE PRESENT ASPECT, SINCE WE ARE OF THE VIEW THAT THE HIGH COURT WAS JUSTIFIED IN RELYING UPON THE SPECIFIC AD MISSION OF THE ASSESSEE THAT DURING THE ASSESSMENT YEAR IN QUESTION, ITS SOLE BUSINESS WAS OF DEALING IN SHARES. WE MUST ALSO ADVERT TO THE CIRCUMSTANCE THAT WHILE THE ASSESSEE HAD FURNISHED LOANS AND ADV ANCES OF RS 11.32 CRORES DURING THE ASSESSMENT YEAR, THIS INCLUDED INTEREST FREE LENDING TO THE EX TENT OF RS 9.58 CRORES. HAVING REGARD TO THESE FACT S AND CIRCUMSTANCES, THE SPECIFIC ADMISSION OF THE AS SESSEE BEFORE THE ASSESSING OFFICER ASSUMES SIGNIFICANCE. THE ASSESSEE MADE AN ADMISSION ON A S TATEMENT OF FACT WHICH IN OUR VIEW, MUST BIND IT. IN THIS VIEW OF THE MATTER, THE PRINCIPAL BUSIN ESS OF THE ASSESSEE WAS NOT OF GRANTING LOANS AND ADVANCES DURING THE ASSESSMENT YEAR. AS A CONSEQUEN CE, THE DEEMING FICTION UNDER SECTION 73 WOULD BE ATTRACTED. HENCE, THE FINDING OF THE HIGH COURT, ON THE FIRST ASPECT, CANNOT BE FAULTED. 6 ITA NO.783/MUM/2019 AMOL CAPITAL MARKETS PVT. LTD. ASSESSMENT YEAR-2014-15 23. THAT LEADS THE COURT TO THE SECOND SUBMISSION WHIC H HAS BEEN CANVASSED IN THE COURSE OF THE HEARING OF THE APPEAL. THE PROVISIONS OF SECTION 43 (5) WERE AMENDED WITH EFFECT FROM 1 APRIL 2006. THE FINANCE ACT, 2005 CONTAINED THE FOLLOWING MEMOR ANDUM EXPLAINING THE AMENDMENT: 'THE PROPOSED AMENDMENT, THEREFORE, SEEKS TO PROVID E THAT AN ELIGIBLE TRANSACTION CARRIED OUT IN RESPECT OF TRADING IN DERIVATIVES IN A RECOGNISED S TOCK EXCHANGE SHALL NOT BE DEEMED TO BE A SPECULATIVE TRANSACTION. THE PROPOSED AMENDMENT ALS O SEEKS TO NOTIFY RELEVANT RULES ETC. REGARDING CONDITIONS TO BE FULFILLED BY RECOGNISED EXCHANGES IN THIS REGARD. FURTHER IT IS ALSO PROPOSED TO AMEND SUB-SECTION (4) OF SECTION 73 SO AS TO REDUCE THE PERIOD OF CARRY FORWARD OF SPECULATION LOSSES FROM EIGHT ASSESSMENT YEARS TO FOUR ASSESSMENT YEAR S.' 24. WHILE AMENDING THE PROVISIONS OF SECTION 43(5), TH E PARLIAMENT INDEED WAS COGNIZANT OF THE PROVISIONS WHICH WERE CONTAINED IN SECTION 73(4). T HE ABOVE MEMORANDUM INDICATES THAT THE PROVISIONS OF SECTION 73(4) WERE PROPOSED TO BE AME NDED SO AS TO REDUCE THE PERIOD OF CARRY FORWARD OF SPECULATION LOSSES FROM EIGHT ASSESSMENT YEARS TO FOUR ASSESSMENT YEARS. HAVING INTRODUCED AN AMENDMENT TO SECTION 73(4), THE PARLI AMENT WOULD HAVE, IF IT INTENDED TO BRING ABOUT A PARITY WITH THE PROVISIONS OF SECTION 43(5) INTRO DUCED A SPECIFIC AMENDMENT. PARLIAMENT, HOWEVER, DID NOT DO SO BY THE FINANCE ACT 2005. IT WAS ONLY WITH EFFECT FROM 1 APRIL 2015 THAT AN AMENDMENT WAS BROUGHT ABOUT TO EXCLUDE TRADING IN S HARES FROM THE DEEMING PROVISION CONTAINED IN THE EXPLANATION TO SECTION 73. PARLIAMENT MAY HAVE HAD REASONS TO ALLOW THE SITUATION TO CONTINUE UNTIL THE AMENDMENT WAS BROUGHT INTO FORCE, INCLUDI NG ITS VIEW IN REGARD TO THE STABILITY OF THE STOCK MARKET. INSOFAR AS THIS COURT IS CONCERNED, IT WOUL D BE DIFFICULT TO HOLD THAT THE PROVISIONS WHICH WERE CONTAINED IN THE FINANCE ACT (NO. 2) 2014 INSO FAR AS THEY AMENDED THE EXPLANATION TO SECTION 73 WERE CLARIFICATORY OR THAT NOTWITHSTANDING THE P ROVISION BY WHICH THE AMENDMENT WAS BROUGHT INTO FORCE WITH EFFECT FROM 1 APRIL 2015, THAT IT S HOULD BE GIVEN RETROSPECTIVE EFFECT. WE REJECT THE SECOND SUBMISSION. 25. EVEN THOUGH AN AMENDMENT, INCLUDING ONE IN THE CONT EXT OF THE FINANCE ACT IS BROUGHT INTO FORCE WITH EFFECT FROM A STIPULATED DATE, THE COURT MAY AS AN EXERCISE OF STATUTORY INTERPRETATION, DETERMINE WHETHER THE AMENDMENT IS CLARIFICATORY OR WAS INTENDED TO OPERATE WITH RETROSPECTIVE EFFECT. SUCH AN EXERCISE WAS CARRIED OUT BY THIS CO URT IN ITS DECISION IN ALLIED MOTORS LTD. ( SUPRA ) . INTERPRETING THE PROVISIONS OF SECTION 43B, THIS CO URT HELD THUS: '10WHILE INTERPRETING SECTION 43-B WITHOUT THE FIR ST PROVISO SOME OF THE HIGH COURTS, IN ORDER TO PREVENT UNDUE HARDSHIP TO THE ASSESSEE, HAD TAKEN T HE VIEW THAT SECTION 43-B WOULD NOT BE ATTRACTED UNLESS THE SUM PAYABLE BY THE ASSESEE BY WAY OF TAX , DUTY, CESS OR FEE WAS PAYABLE IN THE SAME ACCOUNTING YEAR. IF THE TAX WAS PAYABLE IN THE NEXT ACCOUNTING YEAR, SECTION 43-B WOULD NOT BE ATTRACTED. THIS WAS DONE IN ORDER TO PREVENT ANY UN DUE HARDSHIP TO ASSESSEES SUCH AS THE ONES BEFORE US. THE MEMORANDUM OF REASONS TAKES NOTE OF THE COM BINED EFFECT OF SECTION 43-B AND THE FIRST PROVISO INSERTED BY THE FINANCE ACT, 1987. AFTER RE FERRING TO THE FACT THAT THE FIRST PROVISO NOW REMOVES THE HARDSHIP CAUSED TO SUCH TAXPAYERS IT EX PLAINS THE INSERTION OF EXPLANATION 2 AS BEING FOR THE PURPOSE OF REMOVING ANY AMBIGUITY ABOUT THE TERM 'ANY SUM PAYABLE' UNDER CLAUSE (A) OF SECTION 43-B. THIS EXPLANATION IS MADE RETROSPECTIVE. THE MEMORANDUM SEEMS TO PRO CEED ON THE BASIS THAT SECTION 43-B READ WITH THE PROVISO TAKES CARE OF THE HARDSHIP SITUATION AND HENCE EXPLANATION 2 CAN BE INSERTED WITH RETROSPECTIVE EFFECT TO MAK E CLEAR THE AMBIT OF SECTION 43-B(A). THEREFORE, SECTION 43-B(A), THE FIRST PROVISO TO SE CTION 43-B AND EXPLANATION 2 HAVE TO BE READ 7 ITA NO.783/MUM/2019 AMOL CAPITAL MARKETS PVT. LTD. ASSESSMENT YEAR-2014-15 TOGETHER AS GIVING EFFECT TO THE TRUE INTENTION OF SECTION 43-B. IF EXPLANATION 2 IS RETROSPECTIVE, THE FIRST PROVISO WILL HAVE TO BE SO CONSTRUED. READ IN THIS LIGHT ALSO, THE PROVISO HAS TO BE READ INTO SECTION 43-B FROM ITS INCEPTION ALONG WITH EXPLANATION 2.' 26. THE DECISION OF THE COURT WAS INTRINSICALLY BASED ON A HOLISTIC READING OF THE PROVISIONS OF SECTION 43-B. THE MEMORANDUM PROCEEDED ON THE BASIS THAT SECTION 43-B READ WITH THE PROVISO WAS INTENDED TO ALLEVIATE A SITUATION OF HARDSHIP. HENCE, EXPLANATION 2 WAS ENACTED WITH RETROSPECTIVE EFFECT TO CLARIFY THE AMBIT OF SECTIO N 43-B(A). THIS COURT HELD THAT IF EXPLANATION 2 IS RETROSPECTIVE, THE FIRST PROVISO WOULD BE SIMILARLY SO CONSTRUED. THIS POSITION WAS RE-ENFORCED BY A DEPARTMENTAL CIRCULAR. THE COURT, IN OTHER WORDS, I NTERPRETED THE INTENT OF PARLIAMENT. 27. A SIMILAR LINE OF ENQUIRY HAS BEEN ADOPTED IN THE SUBSEQUENT DECISION OF THIS COURT IN ALOM EXTRUSIONS LTD. ( SUPRA ). IN THAT CASE, WHILE CONSTRUING THE PROVISIONS OF SECTION 43-B, THIS COURT HELD: '25. BEFORE CONCLUDING, WE EXTRACT HEREINBELOW THE RELEVANT OBSERVATIONS OF THIS COURT IN CIT V. J.H. GOTLA [1985] 4 SCC 343 WHICH READS AS UNDER: (SCC P. 360, PARA 47) '47. WE SHOULD FIND OUT THE INTENTION FROM THE LA NGUAGE USED BY THE LEGISLATURE AND IF STRICT LITERA L CONSTRUCTION LEADS TO AN ABSURD RESULT I.E. RESULT NOT INTENDED TO BE SUBSERVED BY THE OBJECT OF THE LEGISLATION FOUND IN THE MANNER INDICATED BEFORE, A ND IF ANOTHER CONSTRUCTION IS POSSIBLE APART FROM STRICT LITERAL CONSTRUCTION THEN THAT CONSTRUCTION SHOULD BE PREFERRED TO THE STRICT LITERAL CONSTRUCT ION. THOUGH EQUITY AND TAXATION ARE OFTEN STRANGERS, ATT EMPTS SHOULD BE MADE THAT THESE DO NOT REMAIN ALWAYS SO AND IF A CONSTRUCTION RESULTS IN EQUITY R ATHER THAN IN INJUSTICE, THEN SUCH CONSTRUCTION SHOULD BE PREFERRED TO THE LITERAL CONSTRUCTION.'' THE TEST TO BE APPLIED IS ESSENTIALLY ONE OF THE IN TENT OF THE LEGISLATURE. 28. IN A MORE RECENT DECISION IN CIT V. VATIKA T OWNSHIP (P.) LTD. ( SUPRA ), A CONSTITUTION BENCH OF THIS COURT HELD THUS: '42.1. 'NOTES ON CLAUSES' APPENDED TO THE FINANCE B ILL, 2002 WHILE PROPOSING INSERTION OF PROVISO CATEGORICALLY STATES THAT 'THIS AMENDMENT WILL TAKE EFFECT FROM 1.6.2002'. THESE BECOME EPIGRAPHIC 1 WORDS, WHEN SEEN IN CONTRADISTINCTION TO OTHER AMEN DMENTS SPECIFICALLY STATING THOSE TO BE CLARIFICATORY OR RETROSPECTIVELY DEPICTING CLEAR IN TENTION OF THE LEGISLATURE. IT CAN BE SEEN FROM THE SAME NOTES THAT A FEW OTHER AMENDMENTS IN THE INCOM E TAX ACT MADE BY THE SAME FINANCE ACT SPECIFICALLY MAKING THOSE AMENDMENTS RETROSPECTIVE. FOR EXAMPLE, CLAUSE 40 SEEKS TO AMEND S.92- F. CLAUSE (III-A) OF S.92-F IS AMENDED 'SO AS TO CL ARIFY THAT THE ACTIVITIES MENTIONED IN THE SAID CLAUSE INCLUDE THE CARRYING OUT OF ANY WORK IN PURS UANCE OF A CONTRACT.' (EMPHASIS SUPPLIED). THIS AMENDMENT TAKES EFFECT RETROSPECTIVELY FROM 1-4-200 2. VARIOUS OTHER AMENDMENTS ALSO TAKE PLACE RETROSPECTIVELY. THE NOTES ON CLAUSES SHOW THAT THE LEGISLATURE IS FULLY AWARE OF THREE CONCEPTS: ( I ) PROSPECTIVE AMENDMENT WITH EFFECT FROM A FIXED DATE ; ( II RETROSPECTIVE AMENDMENT WITH EFFECT FROM A FIXED AN TERIOR DATE; AND ( III ) CLARIFICATORY AMENDMENTS WHICH ARE RETROSPECTIVE IN NATURE.' 8 ITA NO.783/MUM/2019 AMOL CAPITAL MARKETS PVT. LTD. ASSESSMENT YEAR-2014-15 29. IN VIJAY INDUSTRIES (SUPRA), DECIDED ON 1 MARCH 2019, A THREE JUDGE BEN CH OF THIS COURT HELD THAT THE PROVISIONS OF SECTION 80AB WHICH WERE INTR ODUCED BY THE FINANCE (NO. 2) ACT, 1980 WITH EFFECT FROM 1 APRIL 1981 COULD NOT BE REGARDED AS CLARIFICATORY IN NATURE. THE COURT HELD THAT THE PROVISION WAS MADE WITH PROSPECTIVE EFFECT AND THE AMENDMENT WOULD NOT APPLY TO ASSESSMENT YEARS 1979-1980 AND 1980-1981 BECAUSE TH E AMENDED PROVISION WAS BROUGHT ON THE STATUTE BOOK AFTER THE ASSESSMENT YEARS IN QUESTION . 30. IN CONCLUSION, WE THEREFORE, HOLD THAT THE AMENDME NT WHICH WAS BROUGHT BY PARLIAMENT TO THE EXPLANATION TO SECTION 73 BY THE FINANCE (NO. 2) ACT, 2014 WAS WITH EFFECT FROM 1 APRIL, 2015. IN ITS LEGISLATIVE WISDOM, THE PARLIAMENT AME NDED SECTION 43(5) WITH EFFECT FROM 1 APRIL, 2006 IN RELATION TO THE BUSINESS OF TRADING IN DERI VATIVES, PARLIAMENT BROUGHT ABOUT A SPECIFIC AMENDMENT IN THE EXPLANATION TO SECTION 73, INSOFAR AS TRADING IN SHARES IS CON CERNED, WITH EFFECT FROM 1 APRIL, 2015. THE LATTER AMENDMENT WAS INTENDED TO TAKE EFFECT FROM THE DATE STIPULATED BY PARLIAMENT AND WE SEE NO REASON TO HO LD EITHER THAT IT WAS CLARIFICATORY OR THAT THE INTENT OF PARLIAMENT WAS TO GIVE IT RETROSPECTIVE E FFECT. 31. THE CONSEQUENCE IS THAT IN A.Y. 2008-2009, THE LOS S WHICH OCCURRED TO THE ASSESSEE AS A RESULT OF ITS ACTIVITY OF TRADING IN SHARES (A LOSS ARISING FROM THE BUSINESS OF SPECULATION) WAS NOT CAPABLE OF BEING SET OFF AGAINST THE PROFITS WHICH IT HAD EARNED AGAINST THE BUSINESS OF FUTURES AND OPTIONS SINCE THE LATTER DID NOT CONSTITUTE PROFITS AND GAINS OF A SPECULATIVE BUSINESS. 32. FOR THE REASONS WE HAVE INDICATED, WE FIND NO ERRO R IN THE DECISION OF THE HIGH COURT. THE APPEAL IS, ACCORDINGLY, DISMISSED. THERE SHALL BE N O ORDER AS TO COSTS. 33. PENDING APPLICATION(S), IF ANY, SHALL STAND DISPOS ED OF. SINCE THE ISSUE HAS ALREADY ATTAINED FINALITY BY TH E JUDGMENT OF HONBLE SUPREME COURT, NO FAULT COULD BE FOUND IN THE DECIS ION OF LEARNED FIRST APPELLATE AUTHORITY IN DENYING THE SET-OFF. BY CONF IRMING THE SAME, WE DISMISS THE APPEAL. 5. THE APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH OCTOBER, 2019. SD/- SD/- (SAKTIJIT DEY) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 17/10/2019 SR.PS:-JAISY VARGHESE 9 ITA NO.783/MUM/2019 AMOL CAPITAL MARKETS PVT. LTD. ASSESSMENT YEAR-2014-15 / COPY OF THE ORDER FORWARDED TO : 1. '$ / THE APPELLANT 2. %&'$ / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. , -% . , . , / DR, ITAT, MUMBAI 6. - /01 / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.