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1 - 9 of 9 (0.28 seconds)Western States Trading Co Ltd vs Commissioner Of Income Tax, Central ... on 18 January, 1971
12. On perusal of provisions of Explanation to Section 73 of the Act, it is seen that where any part of the business of a company other than excluded category of company consists in the purchase and sale of shares of other companies, such company shall, for the purposes of Section 73, be deemed to be carrying on a speculation business to the extent to which the business consists of the purchase and sale of such shares. It is an admitted position that the business of purchase and sale of shares also consists of acquiring fully convertible debentures, which are ultimately converted into shares. It is also not in dispute that the fully convertible debentures were held by the present assessee as stock-in-trade. Therefore, the income by way of interest on fully convertible debentures is to be treated as income of business in nature as per principle laid down by the Hon'ble Supreme Court in the case of Western States Trading Co. (P) Ltd. v. CIT (supra), which was followed by the Hon'ble Madras High Court in the case of Ramnath Goenka (supra) holding that the amount of dividend would form part of the income from business of the assessee if shares were part of assessee's trading asset, even when the dividend received on those shares had been computed as being part of the assessee's income under the head 'Other sources'. In the case on hand, it is not in dispute that the assessee had received interest on FCDs which were held as stock-in-trade. Interest earned on FCDs held as stock-in-trade retains the character of business income, inasmuch as interest has been directly derived from the assets held as stock-in-trade. Explanation to Section 73 is only applicable to the net loss derived by the assessee from the business consisting of sale and purchase of shares. Interest on FCD has been undoubtedly received by the assessee in the course of its carrying on business of sale and purchase of shares. Therefore, net loss from sale and purchase of shares is to be determined only after considering all income and losses derived by the assessee from the said activity for the purpose of Section 73 of the Act. In the light of the admitted position that interest amounting to Rs. 26,27,472 has been earned by the assessee on fully convertible debentures, which were ultimately converted into shares and were held as stock-in-trade, it would be incorrect to say that the said interest income is to be treated as income from other sources. Investment made by the assessee in the fully convertible debentures was with a view to acquire the shares on conversion. FCDs were held as stock-in-trade. Loss arising from the sale of shares convened from the FCDs has been treated as business loss by the AO himself. We, therefore, find no reason as to why interest earned on FCDs which were ultimately converted into shares is not to be treated as business income in nature. The Departmental contention that interest income earned from FCDs is to be treated as income from other sources is not correct and justified. The decisions relied on by the learned Departmental Representative are not applicable to the instant case, inasmuch as interest income earned by the assessee on FCDs is first to be adjusted against the loss arising from the sale of shares and then net amount of loss is to be treated as a loss arising from the business consisting of sale and purchase of shares and then the amount is to be treated as a speculative loss within the meaning of Explanation to Section 73 of the Act. In this view of the matter, we, therefore, uphold the order of the CIT(A) in directing the AO to consider interest income of Rs. 26,27,472 received on FCDs as income from business consisting of sale and purchase of shares and to treat the same as speculative income along with the speculative loss within the meaning of Explanation to Section 73 of the Act. This ground raised by the Revenue is, therefore, rejected.
Commissioner Of Income-Tax, Delhi ... vs R. Dalmia on 5 November, 1980
For and from asst. yr. 1955-56, dividend income came to be assessed under the head 'Income from other sources', if shares are held by an assessee as part of his trading assets, dividend on those shares would still form part of the income from business and carried forward business loss can well be set off against such dividend income [Western States Trading Co. (P) Ltd. v. CIT , CTT v. Shrikishan Chandmal (1966) 60 ITR 303 (MP), CIT v. Bhavnagar Trust Corporation (P) Ltd. , CIT v. R Dalmia .
Commissioner Of Income-Tax vs Ramnath Goenka on 19 August, 2002
12. On perusal of provisions of Explanation to Section 73 of the Act, it is seen that where any part of the business of a company other than excluded category of company consists in the purchase and sale of shares of other companies, such company shall, for the purposes of Section 73, be deemed to be carrying on a speculation business to the extent to which the business consists of the purchase and sale of such shares. It is an admitted position that the business of purchase and sale of shares also consists of acquiring fully convertible debentures, which are ultimately converted into shares. It is also not in dispute that the fully convertible debentures were held by the present assessee as stock-in-trade. Therefore, the income by way of interest on fully convertible debentures is to be treated as income of business in nature as per principle laid down by the Hon'ble Supreme Court in the case of Western States Trading Co. (P) Ltd. v. CIT (supra), which was followed by the Hon'ble Madras High Court in the case of Ramnath Goenka (supra) holding that the amount of dividend would form part of the income from business of the assessee if shares were part of assessee's trading asset, even when the dividend received on those shares had been computed as being part of the assessee's income under the head 'Other sources'. In the case on hand, it is not in dispute that the assessee had received interest on FCDs which were held as stock-in-trade. Interest earned on FCDs held as stock-in-trade retains the character of business income, inasmuch as interest has been directly derived from the assets held as stock-in-trade. Explanation to Section 73 is only applicable to the net loss derived by the assessee from the business consisting of sale and purchase of shares. Interest on FCD has been undoubtedly received by the assessee in the course of its carrying on business of sale and purchase of shares. Therefore, net loss from sale and purchase of shares is to be determined only after considering all income and losses derived by the assessee from the said activity for the purpose of Section 73 of the Act. In the light of the admitted position that interest amounting to Rs. 26,27,472 has been earned by the assessee on fully convertible debentures, which were ultimately converted into shares and were held as stock-in-trade, it would be incorrect to say that the said interest income is to be treated as income from other sources. Investment made by the assessee in the fully convertible debentures was with a view to acquire the shares on conversion. FCDs were held as stock-in-trade. Loss arising from the sale of shares convened from the FCDs has been treated as business loss by the AO himself. We, therefore, find no reason as to why interest earned on FCDs which were ultimately converted into shares is not to be treated as business income in nature. The Departmental contention that interest income earned from FCDs is to be treated as income from other sources is not correct and justified. The decisions relied on by the learned Departmental Representative are not applicable to the instant case, inasmuch as interest income earned by the assessee on FCDs is first to be adjusted against the loss arising from the sale of shares and then net amount of loss is to be treated as a loss arising from the business consisting of sale and purchase of shares and then the amount is to be treated as a speculative loss within the meaning of Explanation to Section 73 of the Act. In this view of the matter, we, therefore, uphold the order of the CIT(A) in directing the AO to consider interest income of Rs. 26,27,472 received on FCDs as income from business consisting of sale and purchase of shares and to treat the same as speculative income along with the speculative loss within the meaning of Explanation to Section 73 of the Act. This ground raised by the Revenue is, therefore, rejected.
The Income Tax Act, 1961
Commissioner Of Income-Tax, Kerala vs Pangal Vittal Nayak And Co. P. Ltd. on 22 August, 1968
Commissioner Of Income-Tax, Ahmedabad vs Bhavnagar Trust Corporation (P.) Ltd. on 12 March, 1967
For and from asst. yr. 1955-56, dividend income came to be assessed under the head 'Income from other sources', if shares are held by an assessee as part of his trading assets, dividend on those shares would still form part of the income from business and carried forward business loss can well be set off against such dividend income [Western States Trading Co. (P) Ltd. v. CIT , CTT v. Shrikishan Chandmal (1966) 60 ITR 303 (MP), CIT v. Bhavnagar Trust Corporation (P) Ltd. , CIT v. R Dalmia .
Puran Mal Girraj Kishore vs Commissioner Of Income-Tax on 10 February, 1992
(i) Kanhaiyalal Puran Mal v. CIT (1966) 60 ITR 354 (Pun))
Commissioner Of Income-Tax vs K.L. Jhunjhunwalla on 4 September, 1980
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