TITLE: Expl to
s. 73: Speculation loss on transactions in derivatives can be set off against
the gains of delivery shares
CASE: CIT vs.
Baljeet Securities Pvt. Ltd (Calcutta High Court)
In AY 2005-06, the assessee, a share broker, entered into
derivatives in which it suffered losses. The said losses constituted
“speculation loss” (prior to the exclusion of derivatives from the ambit of
speculative transactions under clause (d) of s. 43 (5) w.e.f. AY 2006-07). The
assessee claimed that the said speculation loss was eligible to be set-off
against the income arising out of purchase and sale of shares. The Tribunal
upheld the claim of the assessee.
On appeal
by the department to the Tribunal HELD dismissing the appeal:
“Under
the Explanation to s. 73 where any part of the business of a company consists
in the purchase and sale of shares of other companies, such company shall, for
the purposes of the section, be deemed to be carrying on a speculation business
to the extent to which the business consists of the purchase and sale of such
shares. Therefore, the entire transaction carried out by the assessee was
within the umbrella of speculative transaction. There was, as such, no bar in
setting off the loss arising out of derivatives from the income arising out of
buying and selling of shares.”