Page 285 - DCOM301_INCOME_TAX_LAWS_I

Income Tax Laws – I

Notes From the decisions of Hon’ble Courts referred to above, it is clear that/where assessee is
engaged in trading in share of other companies, the business carried on by the assessee
will be in nature of speculative business and profit or loss arising there from will be the
speculative profit/loss/ In the instant case, admittedly, the assessee’s business is not
excluded Horn applicability of provisions of Explanation to section 73. Therefore, the
profit arising on sale of shares will be speculative profits and in our considered opinion,
A.O. has rightly assessed the same as speculative business.
Now let us examine the contention of Id AR of the assessee about Board Circular no 201
which is Explanatory Notes explaining the insertion of Explanation to section 73. The
Board under section 110 has power, inter alia, to tone down the rigour of law and ensure
a fair enforcement to its provisions by issuing circulars in exercise of its powers conferred
upon n under section i 19 which arc binding on the authorities in the administration of the
Act. Under section 119 (2j(aj), however, the circulars as contemplated therein cannot be
adverse to the assessee. The power is given for the purpose of just, proper and efficient
management of work of assessment and in public interest. It is a beneficial power given to
the Board for proper administration of fiscal law so that undue hardship may not be
caused to the assessee and fiscal laws may be correctly applied. Hard cases which could be
properly categorized as belonging to a class thus can be given benefit of relaxation of law
by issuing circulars binding on the taxing authorities. The Ld. AK of the assessee has relied
on various decisions wherein the circulars issued by the CBD’J haves been held to be
binding on the A.O. The Explanatory Notes to the amendment brought to the statute are
not circulars issued u/s Il9(2)(b) of the Act. Since, the Explanatory Notes are neither orders
nor directions issued under the power conferred under the section 119. The decisions
relied by the assessee cannot be applied to the facts of the assessee’s case.
Hon’ble Delhi High Court in the case of Bhandari Company P. Ltd.(supra) has held that
where language of statute is plain, the speech of Finance Minister. Notes of clauses and
circulars issued by the Compam Law Board to the effect that deposits from directors and
shareholders excluded from the definition of deposit could not be resorted for interpreting
provisions.

Hon’ble. Supreme Court in the case of K.P. Varghese vs. 1TO, 131 1TR 597 has held that the
speech made by the Members of Legislature during the course of debate on a Bill are
inadmissible for interpreting the statutory provisions but me speech made by the mover
of the Bill can be referred to for the purpose of ascertaining the mischief to be remedied by
the legislation and the object arid the purpose for which the legislation is enacted. As to
the marginal note to the section, their Lordships of Hon’ble Supreme Court have held
they cannot be referred to for the purpose of construing the section but can be relied upon
as indicating the drift of section or to show what die section is dealing with. As to the
circulars issued be the CBDT, their Lordships have held that they are valuable evidence of
contemporaneous exposition, but must give way where the language of statute is
unambiguous.
Hon’ble Madras High Court in the case of Puthuthofam Ltd. (supra) has held that it well
settled that the explanation given to the Members of Parliament either in the shape of
Notes on Clauses or Memorandum explaining the provisions are not aids to the
construction. The statute has to be construed on its own words and not on what the
supposed intention behind it was except in the somewhat rare event of the provisions not
yielding any meaning unless the intention is taken into account.

Hon’ble Bombay High Court in the case of Associated Cement Co. Ltd. (supra) has held
that the memorandum explaining the provisions of the Finance Bill or the circular of
Board cannot be used to curtain or modify the clear meaning of an expression used in the
Contd...

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