Summary
For AY 2008–2009, the assessee’s deemed speculation loss from share trading could not be set off against non-speculative futures-and-options profits. Its specific admission that share trading was its sole business, considered with the lending facts, defeated the claimed principal-business-of-lending exception. The 2014 amendment excluding companies principally trading in shares from the Section 73 deeming rule operated from 1 April 2015, not retrospectively or as a clarification.
Issues
- Whether lending rather than share trading was the assessee’s principal business for the relevant assessment year.
- Whether the 2014 amendment to the Section 73 Explanation applied retrospectively.
- Whether share-trading losses could be set off against futures-and-options profits.
Provisions considered
- Explanation to Section 73, as amended by Finance (No.2) Act, 2014, Income-tax Act, 1961The new exclusion for companies principally trading in shares took effect from 1 April 2015 and did not govern AY 2008–2009. (¶¶ 16–17, 23–30)
Held
- NBFC registration and the deployment figures did not overcome the assessee’s factual admission that share trading was its sole business that year, particularly with most advances being interest-free. The wider correctness of a deployment-versus-income test was unnecessary to decide. (¶ 19–22)
- Parliament had expressly amended Section 43(5) for eligible derivatives transactions from 2006 while also addressing Section 73(4), but postponed the distinct share-trading exclusion until 2015. No clarificatory or retrospective intention could be inferred merely to create parity. (¶¶ 23–24, 30)
- Courts may identify retrospective or clarificatory intent through interpretation despite a stated commencement date, but the precedents relied upon concerned their particular legislative context and did not establish such intent here. (¶ 25–30)
- For AY 2008–2009 the share-trading loss was speculative under the applicable deeming provision, while the futures-and-options profits were not. The claimed set-off was therefore unavailable. (¶ 31–32)
Result
Appeal dismissed without costs; High Court denial of the claimed set-off upheld. Pending applications disposed of.