HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 130 / 2016 Principal Commissioner of Income Tax-I, New Central Revenue Building, Statute Circle, Jaipur (Raj.) Appellant Versus M/S Eastern Jewels Pvt Ltd., 507, Mahar Bhavan, Thakur Pachwar Ka Rasta, Ramganj Bazaar, Jaipur. Respondent/Assessee For Appellant(s) : Mr. Anuroop Singhi For Respondent(s) : Mr. Sandeep Taneja HON'BLE MR. JUSTICE K. S. JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYAS judgment 23/10/2017 1. By way of this appeal, appellant has challenged judgment and order of Tribunal whereby Tribunal has dismissed appeal of department. 2. This court while admitting appeal on 20.09.2016 framed following question of law:- 1. Whether in facts and circumstances of case Tribunal was justified in holding income of Rs. 1,76,00,708/-, which was earned out of delivery based share transactions, as speculative income and allowing set off of speculative loss of Rs. 1,38,60,740/- against income derived from delivery based share transactions? 3. Counsel for respondent has contended that issue is now covered by decision of Bombay High Court in Commissioner of Income-Tax V/s Lokmat Newspapers P. LTD (2 of 3) [ITA-130/2016] [2010] 322 ITR 43 (Bom) wherein it has been held as under:- submission which has been urged on behalf of Revenue, cannot be accepted, having regard to plain meaning of explanation to Section 73. submission of Revenue is that loss which arises on account of transaction of sale and purchase of shares would constitute loss from speculation business for purposes of explanation. But, that profit which arises from transaction involving actual delivery of shares would not constitute profit for purposes of sub-sections (1) and (2) of Section 73 in respect of which set off can be granted. To accept submission of Revenue would be to introduce restriction into scope and ambit of deeming fiction which is created by explanation to Section 73, which is not contemplated by Parliament. Once deeming fiction is created by law, it must be given full and free effect, of course, in relation to ambit within which it is intended to operate. deeming fiction created by explanation to Section 73 defines when assessee is to be deemed to be carrying on speculation business for purposes of Section. deeming fiction is, therefore, one which arises specifically in context of provisions of Section 73 and is confined to that purpose alone. explanation stipulates that where assessee is company whose business consists in any part of purchase and sale of shares of other Companies, it shall be deemed to be carrying on speculation business to extent to which business consists of purchase and sale of such shares. Whether or not it is profit or loss that has resulted from carrying on such business, is consideration which is alien to meaning of what constitutes speculation business by explanation to Section 73. Once assessee is deemed to be carrying on speculation business for purpose of Section 73, any loss computed in respect of that speculation business, can be set off only against profits and gains of other speculation business. Similarly, for purposes of sub-section (2), loss in respect of speculation business which has not been set off either in whole or in part, can be carried forward and can be set off against profits and gains "of any speculation business". expression "any speculation business" means speculation business of assessee in respect of which profits and gains for Assessment Year in question have arisen and there is no justification to restrict content of that speculation business where profits have arisen by excluding business involving actual delivery of shares. No such restriction is found in explanation. (3 of 3) [ITA-130/2016] To impose one is legislative function. In other words, once assessee is carrying on speculation business and profits and gains have arisen from that business during course of Assessment Year, assessee is entitled to set off losses carried forward from speculation business arising out of previous Assessment Year 4. In view of above, issue is answered in favour of assessee against department. 5. appeal stands dismissed. (VIJAY KUMAR VYAS),J. (K.S.JHAVERI),J. B.M.G/Gourav/27 Principal Commissioner of Income-tax-I, Jaipur v. Eastern Jewels Pvt Ltd