|CORAM:||Ashwani Taneja (AM), C. N. Prasad (JM)|
|CATCH WORDS:||composite business, shares, speculative loss|
|DATE:||March 16, 2016 (Date of pronouncement)|
|DATE:||April 13, 2016 (Date of publication)|
|FILE:||Click here to download the file in pdf format|
S. 43(5), Explanation to s. 73: Where the assessee is a dealer in shares, the entire business of share trading and derivatives should be treated as a composite business and aggregated before applying Explanation to
The assessee was a member of two recognized Stock Exchange – BSE & NSE. Both Exchanges had two separate segments i.e. Capital Market Segment and Derivative Segment. In Capital market segment, assessee made trading of equity shares whereas in derivative segment, future and options. The AO held that the transactions done by the assessee which were not covered u/s 43(5) shall be hit by explanation to section 73 and shall be treated as speculative in nature and accordingly he disallowed a sum of Rs.56,94,166/- as deemed speculative loss, applying explanation to section 73. CIT (A) held that derivative transactions were covered by sec. 43(5)(d) and therefore, could not be held as speculative transactions. On the other hand, share trading done in the cash market is hit by explanation to section 73, and therefore, any loss/profit arising there from shall be deemed to be speculative, and could only be set off against income of subsequent years.
Held, by the Tribunal, where the assessee is a dealer in shares, the entire business consists in sale purchase of shares, then, it should be treated as composite business. Also, assessee’s stand of treating the whole business as composite business has always been accepted by the revenue in earlier as well as subsequent years. Accordingly, whole of assessee’s business was treated as speculative and loss of current year was allowed to be set off against profits of the current year.