Law:

Section:

JUDGMENT N. Kumar, J. - The assessee in both the appeals are common and the substantial questions of law in these two appeals are also the same, hence, both appeals are taken up together for consideration to dispose of in this common judgment. 2. The revenue has preferred these two appeals against the finding of the tribunal upholding the claim of the assessee on the ground that, under the proviso (c) of Section 43(5) of Income-tax Act, 1961 (hereinafter referred to as 'the Act') the nature of jobbing and arbitrage cannot be considered as a speculative transaction. 3. The assessee is a share broker and a member of both National Stock Exchange and Bangalore Stock Exchange Limited. The assessee had drawn a composite Income and Expenditure Statement in which the income from various sources like brokerage, handling charges, commission, profit on sale of current investments etc. are reflected. The assessee filed a return of income showing a loss of Rs.52 lakhs for the assessment year 2001-2002. The remand report dated 08.1.2005, shows that the transactions are in the nature of jobbing and arbitrage, done to guard against loss which could have arisen in ordinary course of assessee's business as a member. The assessing authority came to the conclusion that the assessee is a private company and not a banking company, therefore, the case falls squarely within provisions and in terms of explanation to Section 73 of the Act. Therefore, held that the specific provisions by way of explanation to Section 73 of the Act necessarily suggests that the business loss should be considered as speculation business loss and loss arising therefrom needs to be treated as speculative loss. Therefore, he rejected the claim of the assessee for set off against other business profits but allowed to be carried forward by setting of the loss from speculation business. Aggrieved by the said order, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals), who upheld the said order. It is against these two orders, the assessee preferred an appeal before the Tribunal and the Tribunal on careful consideration of the provisions of law, the contents of the remand report and…

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