Loss on account of intraday trading in shares settled through clearing difference bills is not speculative in nature

Issue before court:

• Whether the assessee’s loss on account of intraday trading in shares, is truly speculative in nature and liable to be treated as such?
• Whether the interest-free loans secured by the assessee to the tune of 1.55 crores were in the circumstances of the case liable to be added under Section 68 of the Act.

Brief Facts:

• The assessee engaged in trading in stocks and shares and acts as a sub-broker. Assessee claimed a sum of 66,35,210/- as business expenditure on account of clearing difference. In the AY 2007-08 it also reflected an amount of Rs. 1.55 crores as loans/advance obtained from various parties and entities.
• The assessing officer treated the Rs. 66.35 lakhs as a speculative loss and disallowed it on account of Section 73(1) and  added Rs. 1.55 Crores  under Section 68, doubting the genuineness of the transaction.
• CIT (A) as well as ITAT favoured assessee. Both the appellate bodies were of the opinion that the nature and character of the transaction was such that it did not fall within the description of speculative transaction and that given the material produced by the assessee, all the shares and scripts purchased from the broker were on firm basis.

Contention of the revenue: