ITAT quashes Addition by AO towards Business Loss on ground of Absence of Speculation Loss of Share Capital Income [Read Order]

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) quashed the addition made by the Assessing Officer (AO) towards the business loss on the grounds of the absence of speculation loss of share capital income. 

DAM Capital Advisors Limited, the appellant assessee was a company engaged in the business of share broking and was a member of the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) the activities of the assessee include providing equity research and stock broking services to institutional clients. 

The assessee appealed against the order passed by the Commissioner of Income Tax (Appeals) for confirming the disallowance of Rs. 56,50,7527- under section 36(1)(iii) of the Income Tax Act and for the addition made towards the business loss and also for confirming the addition made by the Assessing Officer (AO) towards transfer pricing adjustments. 

Hiro Rai / Ritu Punjabi, the counsels for the assessee contended that from the break of income as given in the P&L Account, it can be seen that the income was derived from brokerage, income from advisory activities, and other income consisting of dividends from long term and short term activities, interest on deposits, etc. 

Also submitted that the Assessing Officer had ignored the various submissions made by the assessee and had simply taken the loss from the computation of income and held the same to be arising out of speculative share transactions. 

Abhishek Kumar Singh, the counsel for the department contended that the assessee had derived the loss from the trading of purchase and sale of shares that was settled otherwise than the actual delivery. Accordingly, the Assessing Officer treated the loss as arising out of a speculative transaction as per provisions of section 43(5) of the Income Tax Act,1961, and held the same as not to be allowed. 

The Bench observed that the assessee was not deriving any income out of share trading that was speculative and, therefore, the finding given by the lower authority stating that the assessee was involved in speculation was factually incorrect. 

The two-member bench comprising Amit Shukla (Judicial) and Padmavathy (Accountant) deleted the addition made by the Assessing Officer and allowed the ground in favour of the assessee. 

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