SNOWTEX INVESTMENT LIMITED v. PRINCIPAL COMMISSIONER OF INCOME TAX, CENTRAL-2, KOLKATA

2. Section 73 deals with losses from speculation business. Under sub-Section (1) of Section 73, a loss computed in relation to speculation business carried on by an assessee can only be set off against the profits and gains of another speculation business. The Explanation to Section 73 contains a deeming fiction where certain businesses shall, for the purposes of the section, be deemed to be speculation businesses. The Explanation also carves out an exception in respect of certain specified businesses which shall lie outside the fold of the deeming fiction. Prior to the amendment of the Explanation by the Finance (No. 2) Act 2014 with effect from 1 April 2015, the business of trading in shares carried on by a company was not excluded from its purview. While on the one hand, Parliament amended Section 43(5) with effect from 1 April 2006 as a result of which trading in derivatives on recognised stock exchanges fell outside the purview of the business of speculation, a corresponding amendment to the Explanation to Section 73 in respect of trading in shares was brought in only with effect from 1 April 2015. In the instant case, there is no dispute about the fact that the assessee was registered as an NBFC under the provisions of the Reserve Bank of India Act, 1934. Section 73(1) does not define specifically, the circumstances in which the principal business of a company would be regarded as a business of the specified description. It is evident that the assessee itself stated that share trading was its sole business during the assessment year in question i.e. A.Y. 2008- 2009. The principal business of the assessee was not of granting loans and advances during the assessment year. As a consequence, the deeming fiction under Section 73 would be attracted. Hence, the finding of the High Court, on the first aspect, cannot be faulted. [Paras 16, 17, 20, 22] [695-E-F; 696-B-C, F ; 697-A, G] SNOWTEX INVESTMENT LTD. v. PRINCIPAL COMMISSIONER OF INCOME TAX 689

3. The provisions of Section 43(5) were amended with effect from 1 April 2006. While amending the provisions of Section 43(5), the Parliament indeed was cognizant of the provisions which were contained in Section 73(4). A memorandum contained in the Finance Act, 2005 indicated that the provisions of Section 73(4) were proposed to be amended so as to reduce the period of carry forward of speculation losses from eight assessment years to four assessment years. Having introduced an amendment to Section 73(4), the Parliament would have, if it intended to bring about a parity with the provisions of Section 43(5) introduced a specific amendment. Parliament, however, did not do so by the Finance Act 2005. It was only with effect from 1 April 2015 that an amendment was brought about to exclude trading in shares from the deeming provision contained in the Explanation to Section 73. Parliament may have had reasons to allow the situation to continue until the amendment was brought into force, including its view in regard to the stability of the stock market. It would be difficult to hold that the provisions which were contained in the Finance Act (No. 2) 2014 insofar as they amended the Explanation to Section 73 were clarificatory or that notwithstanding the provision by which the amendment was brought into force with effect from 1 April 2015, that it should be given retrospective effect. [Paras 23, 24] [697-H; 698-A, C-G] Commissioner of Income Tax (Central)-I, New Delhi v. Vatika Township Private Ltd. (2015) 1 SCC 1 : [2014] 12 SCR 1037 – followed.