Bombay HC clarifies position on applicability of Explanation to S. 73

CIT v HSBC Securities & Capital Markets India (P.) Ltd. [ITA No: 657 OF 2007] (Bombay HC)


The assessee filed its return of income showing loss of Rs. 1,65,29,711 comprising of loss of Rs 1,72,31,711 arising out of the purchase and loss of shares and income from other sources of Rs 7,02,000. The AO passed assessment order under section 143(3) holding the aforesaid  loss as speculation loss by virtue of explanation to section 73.

Before the CIT(A), the assessee argued that “the explanation refers to the words “income which is chargeable under the heads” and since in the Appellant’s case, the only income which is included in gross total income is dividend income, the gross total income mainly consists of “Income from other sources” and therefore, explanation does not apply to Appellants case.

The CIT(A) partly allowed the assessee’s appeal. However, the ITAT reversed the claim of assessee and invoked explanation to section 73 to treat the aforesaid loss as speculation in nature.


  • Section 73 would not apply in view of the fact that the explanation thereto, does not operate in respect of a company whose gross total income consists mainly of income which is chargeable under the heads of “interest on securities”, “income from housing property”, “capital gains” and “income from other sources”
  • Reliance placed on the judgment of the Division Bench of this Court in the case of Darshan Securities (P.) Ltd Ltd.[2012] 206 Taxman 68

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