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Explanation to section 73 of the Income-tax Act, 1961 - Loss - Carry forward and set off of - Speculation loss - Assessment year 1977-78 - whether explanation to section 73 will apply only where share dealing was a part of company's business and not its sole business - Held, no FACTS For the assessment year 1977-78, the assessee-company returned a loss of Rs. 1,56,087 from share dealings and claimed the same to be business loss. In view of the Explanation to section 73 added with effect from 1-4-1977, the ITO treated the same as speculation loss. The ITO rejected the assessee's contention that the Explanation to section 73 would apply only where share dealing was a part of a company's business and not its sole business as in the assessee's case. The Commissioner (Appeals) confirmed the ITO's order. On second appeal, the Tribunal found that in addition to the share dealings, there was only one transaction of investment of the assessee's surplus funds for a brief period whereby the assessee had earned a small amount of interest. The Tribunal concluded that such a transaction did not amount to carrying on of money-lending business. Thus, the Tribunal came to the conclusion that the sole business of the company was in share dealings. Accordingly, accepting the assessee's contention it held that where a part of the business of a company consisted of the purchase and sale of shares, then only the Explanation to section 73 would come into play and not otherwise when the sole business of the company was in share dealings. The orders of the authorities below were, thus, reversed. On reference, the assessee, while supporting the Tribunal's order, relied on the departmental Circular No. 204 dated 24-7-1976. HELD The legal implication of the phrase 'any part of the business of a company'' occurring in the Explanation to section 73 does not create any difficulty. The assessee had not been able to cite any case where the word 'any' had been used in a restrictive sense so as not to include 'all'. Moreover, one failed to see why 'part' should not include 'the whole' in this case. Such construction of statute always leads to absurdity. Plain words of the statute did not warrant…

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