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made by the AO under explanation to section 73 of I.T. Act as the assessee has wrongly set off speculative loss against non-speculative income."

3. Briefly stated facts are that the assessee company earned profit in derivative transactions at Rs. 36.87 crores (precisely Rs.36,87,83,681/-) . The assessee has set off these losses incurred in purchase and sales of shares/ securities against income earned in derivative transactions amounting to Rs. 36.42 crores (precisely Rs.36,41,73,414/-). The AO required the assessee to explained as to why explanation to section 73 of the Act should not be applied and loss incurred in purchase and sale of shares by the assessee need to be treated as deemed speculative loss of Rs. 36.87 crores and should not be disallowed? The assessee stated that it is a NBFC and principal business is of financing, including money lending/granting of loans, investment in subsidiary companies. The assessee claim that the income from money lending/granting of loans of business is Rs.7.57 crores and further interest on fixed deposit is Rs. 0.24 crores. According to assessee, such income from granting of loans and advances constituted 71.18% of the total income. Further, the assessee has deployed an average of 500 crores in business of granting of loans and advances and the profit earned from derivative segment of Rs. 36.41 crores is followed by losses in share trading amounting to Rs. 36.87 crores, which is inextricably linked with each other and hence, it requires set off. The assessee claimed finally as under: -

                         FY 2008-09       FY 2009-10      FY 2010-11
       Loan Book         24.58            97.50           65.42
       Interest          5.43             9.83            15.65
       income from
       lending
       business

It would, therefore, be wrong to conclude on the true nature of the business of the appellant by looking at the financial numbers of the previous year 2007 -08 and 2008-09 since it takes time to build a lending business. The appellant is engaged in two types of business activity i.e. NBFC business and other than NBFC business. Majority of the expenses are pertaining to NBFC business activity. The appellant drew my attention to the segment reporting part of audited financial statements. As per the segment reporting requirement, Auditors have certified as per requirements of Accounting Standard 17 that out of total revenue of Rs. 101,813,462/ -, Rs. 54,340,193/- is contributed by Lending Activities which constituents 53% of total revenue. The assessing officer has only observed the year end numbers and ignored the other disclosure in audited financials. The appellant submitted that during the remand proceedings, the appellant has provided all the supporting and annexures to the assessing office r for verification of the facts. As per the details submitted by the appellant on February 18, 2013, it was explained to assessing officer that the explanation to section 73 is not applicable as the principle business of the appellant is granting of loans and advances. I find that details submitted by the appellant in this regard have been ignored by the Ld.AO.

16. The brief facts in the present case (Angel Global Capital Private Limited) are that the assessee claimed that it was registered NBFC with RBI and into the business of granting of loans to the clients of broking subsidiaries. All the broking entities with whom transactions were in question i.e. ABL & ASL were 100% subsidiaries of the Assessee. It was contended by assessee that the Clients may trade or open account in different segments through different companies in the Angel Group, but it was considered as one entity by the clients i.e. "Angel Broking Limited'. The Assessee played the role of facilitating funds for seamless operation across all its 100% subsidiaries which includes namely ABL (registered in BSE & NSE, certificate in NSE segment was earlier held by ACDL, which was merged with ABL w. e. f. April 1, 2008), ACBPL (registered in NCDEX & MCX) & ASI. The Assessee Company also stood as corporate guarantor for the borrowing lines extended by banks to ABL & ACBPL and had declared Rs. 269 crores as contingent liabilities as on March 31, 2010. The money which was received by the Assessee Company from its subsidiaries or vice versa was on account of client-related transactions. The flow of funds from the broking subsidiaries (ABL) to NBFC (AGCPL) was for the following reasons:

One of the prime considerations for clients to open accounts with any broking house is availability of all facilities under one roof i.e. trading in equity, commodity, funding by NBFC. Pertinently, clients took finance from NBFC and in turn did trading i.e. purchase and sale of shares in broking entity in the Angel group. Hence, movement of funds between group companies on account of client position was inevitable. Thus, the flow of funds between Angel group was purely and potently business transaction.