Under Explanation to section 73 of Income Tax Act, 1961 even delivery-based loss on shares is “speculation” loss

Under Explanation to section 73 of Income Tax Act, 1961 even delivery-based loss on shares is “speculation” loss

Brief:- (i) The Explanation to s.73 creates a fiction that the loss suffered by certain companies from the business of purchase & sale of shares shall be deemed to be speculation loss. The Explanation is not inconsistent with the object of introduction. The CBDT Circular dated 24.7.1976 cannot be treated as guide for interpretation of s. 73 when the provision is very clear and free from any ambiguity;

(ii) The definition of “speculative transaction” in s. 43(5) is not applicable to the Explanation to s. 73. The fact that the assessee settled the transactions by physical delivery is irrelevant. CIT vs. Arvind Investments 192 ITR 365 followed);

(iii) The fact that the Explanation to s. 73 was introduced to curb manipulation does not mean that it has to be confined to only those cases in view of the clear language of the provision.

In The High Court At Calcutta

Please become a Premium member. If you are already a Premium member, login here to access the full content.