Principal Commissioner Of Income Tax-I,New Central Revenue Building, Statute Circle, Jaipur (Raj v. M/S Eastern Jewels Pvt Ltd., 507, Mahar Bhavan, Thakur Pachwar Ka Rasta, Ramganj Bazaar, Jaipur

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR D.B. Income Tax Appeal No. 130 / 2016 Principal Commissioner of Income Tax-I,New Central Revenue Building, Statute Circle, Jaipur (Raj.) ----Appellant Versus M/S Eastern Jewels Pvt Ltd., 507, Mahar Bhavan, Thakur Pachwar Ka Rasta, Ramganj Bazaar, Jaipur. ----Respondent/Assessee _____________________________________________________ For Appellant(s) : Mr. Anuroop Singhi For Respondent(s) : Mr. Sandeep Taneja _____________________________________________________ HON'BLE MR. JUSTICE K. S. JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYAS judgment 23/10/2017 1.By way of this appeal, the appellant has challenged thejudgment and order of the Tribunal whereby the Tribunal hasdismissed the appeal of the department. 2.This court while admitting the appeal on 20.09.2016 framed the following question of law:- “ 1. Whether in the facts and circumstances of the casethe Tribunal was justified in holding the income of Rs.1,76,00,708/-, which was earned out of delivery basedshare transactions, as speculative income and allowingthe set off of speculative loss of Rs. 1,38,60,740/-against the income derived from delivery based sharetransactions? 3.Counsel for the respondent has contended that the issue isnow covered by the decision of Bombay High Court inCommissioner of Income-Tax V/s Lokmat Newspapers P. LTD [2010] 322 ITR 43 (Bom) wherein it has been held as under:- 2.This court while admitting the appeal on 20.09.2016 framed the following question of law:- “ 1. Whether in the facts and circumstances of the casethe Tribunal was justified in holding the income of Rs.1,76,00,708/-, which was earned out of delivery basedshare transactions, as speculative income and allowingthe set off of speculative loss of Rs. 1,38,60,740/-against the income derived from delivery based sharetransactions? 3.Counsel for the respondent has contended that the issue isnow covered by the decision of Bombay High Court inCommissioner of Income-Tax V/s Lokmat Newspapers P. LTD [2010] 322 ITR 43 (Bom) wherein it has been held as under:- “The submission which has been urged on behalf ofthe Revenue, cannot be accepted, having regard to theplain meaning of the explanation to Section 73. Thesubmission of the Revenue is that a loss which ariseson account of a transaction of the sale and purchase ofshares would constitute a loss from a speculationbusiness for the purposes of the explanation. But, thatthe profit which arises from a transaction involving theactual delivery of shares would not constitute a profitfor the purposes of sub-sections (1) and (2) of Section73 in respect of which a set off can be granted. Toaccept the submission of the Revenue would be tointroduce a restriction into the scope and ambit of thedeeming fiction which is created by the explanationto Section 73, which is not contemplated byParliament. Once a deeming fiction is created by law, itmust be given full and free effect, of course, in relationto the ambit within which it is intended to operate. Thedeeming fiction created by the explanation to Section73 defines when an assessee is to be deemed to becarrying on a speculation business for the purposes ofthe Section. The deeming fiction is, therefore, onewhich arises specifically in the context of theprovisions of Section 73 and is confined to thatpurpose alone. The explanation stipulates that wherean assessee is a company whose business consists inany part of the purchase and sale of shares of otherCompanies, it shall be deemed to be carrying on aspeculation business to the extent to which thebusiness consists of purchase and sale of such shares.Whether or not it is a profit or loss that has resultedfrom carrying on such business, is a considerationwhich is alien to the meaning of what constitutes aspeculation business by the explanation to Section 73.Once an assessee is deemed to be carrying on aspeculation business for the purpose of Section 73,any loss computed in respect of that speculationbusiness, can be set off only against the profits andgains of an other speculation business. Similarly, forthe purposes of sub-section (2), the loss in respect ofa speculation business which has not been set offeither in whole or in part, can be carried forward andcan be set off against profits and gains "of anyspeculation business". The expression "any speculationbusiness" means a speculation business of theassessee in respect of which profits and gains for theAssessment Year in question have arisen and there isno justification to restrict the content of thatspeculation business where profits have arisen byexcluding a business involving actual delivery ofshares. No such restriction is found in the explanation. To impose one is a legislative function. In other words,once the assessee is carrying on a speculationbusiness and the profits and gains have arisen fromthat business during the course of the AssessmentYear, the assessee is entitled to set off the lossescarried forward from a speculation business arising outof a previous Assessment Year” 4.In view of the above, the issue is answered in favour of theassessee against the department. 5. The appeal stands dismissed. (VIJAY KUMAR VYAS),J. (K.S.JHAVERI),J. B.M.G/Gourav/27