The AO observed that the assessee has earned an amount of Rs.1,31,39,526 on account of trading in shares and also earned brokerage of Rs.1,49,75,135. He held that according to Explanation to S. 73, the nature of share trading business of the assessee is d

The AO observed that the assessee has earned an amount of
Rs.1,31,39,526 on account of trading in shares and also earned brokerage of
Rs.1,49,75,135. He held that according to Explanation to S. 73, the nature of
share trading business of the assessee is deemed to be speculative and as per
Explanation to S. 28, speculation business should be segregated from other
business. Therefore, he allocated the expenditure incurred to speculative
business and other business. He, accordingly, arrived at a speculation loss of
Rs.49,66,658.

The CIT(A) deleted the allocation of expenditure made by the
AO and allowed this ground.

The Revenue preferred an appeal to the Tribunal.

The CIT(A) has correctly held that considering the
transactions as speculative will come only when a particular transaction is
considered as speculative in nature u/s.43(5). So long as the assessee deals in
delivery-based transactions, Explanation to S. 28 does not come into operation
as there are no speculative transactions u/s.43(5). The issue can only be
considered with reference to Explanation to S. 73. That portion of the Section
will come into play after considering the income under the head ‘Income from
Business’ as also income under other heads. The allocation of expenditure and
segregation of business will come into picture only when the assessee indulges
in speculative nature of transactions. The order of the CIT(A) was held to be
correct both on facts as well as on law.