Law:

Section:

Section 73 of the Income-tax Act, 1961 - Losses - In speculation business - Assessment year 1994-95 - Whether Explanation added to section 73 does not bring about any inconformity with object and purpose of section 73 which has been enacted for special purposes and for that section only; provision of this section with Explanation overrides other provisions - Held, yes - Whether under Explanation to section 73, for purpose of setting off or carrying forward of loss, selling of shares by certain companies is taken by statute as speculation business, even though transactions of purchases and sales may have been followed by delivery of scrips and, as such, cannot be treated as speculative transactions as defined in section 43(5) - Held, yes - Assessee-company was engaged in manufacturing of cooling towers and in business of selling and purchasing of shares - During relevant assessment year, it claimed set off of loss arising out of purchases and sales of shares as stock-in-trade against profits of business - Revenue authorities disallowed set off by treating said loss as loss arising from speculation business within meaning of Explanation to section 73 - Whether by virtue of legal fiction mentioned in Explanation to section 73, assessee-company would not be entitled to benefit of setting off or carry forward of speculation loss, except as against other speculation business and since assessee had no speculation business activity other than sale and purchase of shares, its claim of set off was rightly disallowed - Held, yes FACTS The assessee-company was engaged in the manufacturing of cooling towers and in the business of selling and purchasing shares. The gross total income of the assessee-company was chargeable under the heads 'Profit and gains of business or profession', 'Capital gains' and 'Income from other sources'. During relevant assessment year, it claimed set off of loss arising out of purchase and sale of shares as stock-in-trade against profits from business under section 70. The Assessing Officer disallowed the set off by treating said loss as loss arising from speculation business within the meaning of theExplanation to section 73. On appeal, the…

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