Law:

Section:

Section 73 of the Income-tax Act, 1961 - Losses - In speculation business - Assessment year 1989-90 - Whether speculation loss cannot be set off except against a speculative profit permissible of being carried forward for being set off in subsequent years stretching to a period of eight years and not otherwise, unless test of Explanation is satisfied - Held, yes CASES REFERRED TO CIT v. Harprasad & Co. (P.) Ltd. [1975] 99 ITR 118 (SC) [Para 4 ], CIT v. J.H. Gotla [1985] 156 ITR 323/23 Taxman 14J (SC) [Para 4] and Eastern Aviation & Industries Ltd. v. CIT [1994] 208 ITR 1023/ 74 Taxman 641 (Cal.) [Para 4]. JUDGMENT D.K. Seth, J. - The question to be answered is : "Whether, on the facts and in the circumstances of the case, the learned Income-tax Appellate Tribunal was justified in directing the Assessing Officer to compute the total income of the assessee without applying the provisions of Explanation to section 73 when the loss in share trading exceeded the income from other sources and the loss was a loss from speculative business contrary to the finding of the Income-tax Appellate Tribunal that the loss is not a speculative loss ?" 2. The Assessing Officer had disallowed the benefit of the Explanation to section 73 of the Income-tax Act, 1961, to the assessee in respect of the assessment year 1989-90 declining to set off the loss in share dealing on the ground that this share dealing is a speculation business carried on by the assessee under section 73(1) of the Income-tax Act, 1961. The Commis-sioner (Appeals) and the learned Tribunal had reversed the said order and had allowed the benefit of the Explanation to section 73 holding that the main source of income of the assessee consists of income from interest on securities and income from house properties. It appears from the order of the appellate authority and the learned Tribunal that the income on the head of interest on securities and income from other sources exceed the income of the assessee on other heads. From page 25, paragraph 3 of the order of the learned Tribunal, it appears that the income from other sources was Rs. 5,73,701 whereas the business income was Rs. 3,33,670. Upon such…

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