The assessee-company which is  engaged in the business of trading in shares on its own account, derivative transactions and share broking activity. It incurred loss in respect of the business of purchase and sale of shares on its own account and the same was claimed to be a normal business loss. The AO held that the loss incurred from the said activity was liable to be treated as a deemed speculation loss in terms of Explanation below S. 73 and rejected the claim.  CIT (A) up held the order of the AO. On appeal  the Accountant Member  accepted  the claim of the assessee that the loss incurred from the business of purchase and sale of shares on its own account constituted a normal business loss. The Judicial Member did not agree with the view taken by the Accountant Member and proceeded a pass a separate order taking a different view. He held that the assessee-company during the year under consideration was engaged in a systematic business activity of purchase and sale of shares of other companies on its own account and the loss suffered in the said activity was liable to be treated as speculation loss in terms of Explanation to section 73.In view of difference of opinion between the members of the Tribunal, the matter was referred to the Third Member,  Third member held that the business carried on by the assessee during the year under consideration remained the same and it was continued to be of trading in shares on its own account, derivative transactions and share broking activity as admitted by the AO himself in the assessment order. As categorically observed by the AO, there was no material difference or any deviation in the nature of business carried on by the assessee during the year under consideration, vis-a-vis the preceding year. This position gets further fortified from the gross income earned by the assessee from the different activities. The legal position that emanates from various judicial pronouncements is that the Explanation to section 73 does not differentiate between ‘delivery based transactions’ and ‘derivative transactions in F&O segment’ and same applies to the entire business of purchase and sale of shares, whether such trading is delivery based or non-delivery based, whether there is profit or loss from such business. In the present case, the assessee-company has treated the entire activity of purchase and sale of shares, which comprised of both the delivery based and non-delivery based trading as one composite business and, accordingly, claimed set off of the loss incurred in delivery based trading against profit derived from derivative trading. If the ratio of earlier judicial pronouncements is applied to the facts of the assessee’s case, it follows that the aggregation of the share trading loss and profit from derivative transaction should be done before application of Explanation to section 73 and where there was surplus profit on such aggregation, Explanation to section 73 would not be applicable. Therefore, the view taken by the Accountant Member is correct.   (AY. 2009 -10)