Delhi H.C : Solitary transaction of purchase and sale of shares in which assessee incurred loss due to fall in value of share, did not constitute assessee’s business and loss could be set off against assessee’s profit from other businesses

High Court Of Delhi

CIT VS. Orient Instrument (P.) Ltd.

Assessment Year : 1991-92

Section : 73

S. Ravindra Bhat And Najmi Waziri, Jj.

It Appeal No. 112 Of 2000

November 20, 2013


1. The following substantial question of law was framed at the time of admission of this appeal :

“Whether the Tribunal was justified in its interpretation of the Explanation to section 73 of the Income-tax Act 1961 ?”

2. The assessee, in the present case, at the relevant time, was engaged in the business of trading of crafts paper, installation, job work, consultancy and commission, etc. It reported Rs. 5,53,500 as loss for the relevant period the assessment year 1991-92 on account of a transaction whereby it purchased and sold shares. The Assessing Officer was of the opinion that this amounted to a speculative transaction and, consequently, the loss could not be set off against the assessee’s profits earned from other businesses. The disallowance was carried in appeal unsuccessfully by the assessee. The Appellate Commissioner returned the findings that the assessee was not engaged, inter alia, in the business of purchase and sale of shares so as to fall into the mischievous transaction under section 73. The Appellate Commissioner took into consideration the resolution of the company made at the relevant time on October 30, 1990, and also the fact that it was engaged in other business. The Appellate Commissioner dismissed the assessee’s appeal and the matter was carried in further appeal to the Income-tax Appellate Tribunal which accepted the assessee’s appeal.

3. Mr. Sanjeev Sabharwal, senior standing counsel for the Revenue, urges that the transaction in question was a speculative one falling within the Explanation to section 73(4). He placed reliance upon the decision of the Madhya Pradesh High Court reported as CIT v. Bhikamchand Jankilal [1981] 131 ITR 554 to say that even a single transaction of sale or purchase of shares might amount to business. Counsel for the assessee, Dr. Rakesh Gupta, on the other hand, relied upon the decision of the Calcutta High Court reported as Standipack (P.) Ltd. v. CIT [2013] 350 ITR 251/[2012] 211 Taxman 144/27 150 in support of his submission.

4. In the present case, the facts are that the assessee was engaged in the business of trading of crafts paper, installation, job work, consultancy and commission. By all means, the transaction whereby it purchased the shares and incurred loss on account of the fall in the value of the share was a solitary one. The findings of the Tribunal that the transaction did not constitute the business carried on by the company, cannot be termed as perverse or unreasonable. In the circumstances, the court is satisfied that no substantial question of law arises.

5. The appeal is accordingly dismissed.

[Citation : 360 ITR 182]