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Unit 9: Income under the Head Business and Profession

statute. Hon’ble Bombay High Court in the case of CIT vs. Central Bank of India Ltd. (bull Notes
Bench) supra has held that where there is no ambiguity in language used in the statute, the
notes on clauses and memorandum explaining provisions cannot be referred to as aids in
interpretation.
From the decisions of various courts referred to above it is clear that where the language
of statute is clear, the notes on clauses and memorandum explaining the statutory provisions
cannot he resorted to interpret the statutory provisions the language used in explanation
to section 73 is plain, clear and unambiguous. Therefore, the memorandum explaining the
provisions of amendment cannot be resorted to for the purpose of interpretation. As
discussed above the explanatory notes are not circulars issued under section 119(2)(b) of
the Act and. therefore, the decision relied upon by the Ld. Counsel for the assessee are
distinguishable on facts The decision relied by the assessee in the case of vegetable products
(supra) is also not applicable as there is no split of opinion on the applicability of the notes
and clauses and memorandum explaining the statutory provisions. Rather Hon’ble Supreme
Court as discussed above in the case of K.P. Varghese has held that explanatory notes
cannot be used for interpreting the provisions of law. In view of above discussions, in our
considered opinion Ld. CIT(A) was not justified in deleting the addition on the basis of
Explanatory Notes, therefore. The income from trading of shares as observed above will
be speculative business within the meaning of provision of explanation of section 73 of
the Act. We, therefore, set the order of the CIT (A) and restore the order of the A.O.
Questions
1. Study and analyse the above case

2. Write down the case facts.
3. What do you infer from it?
Source: http://taxguru.in/income-tax-case-laws/income-from-trading-of-shares-will-be-speculative-
business-within-meaning-of-provision-of-explanation-to-section-73.html

9.8 Summary

The meaning of the expression ‘Business’ has been defined in Section 2(13) of the Income-tax
Act. According to this definition, business includes any trade, commerce or manufacture
or any adventure or concern in the nature of trade, commerce or manufacture.

The expression ‘Profession’ has been defined in Section 2(36) of the Act to include any
vocation. In the case of a profession, the definition given in the Act is very much inadequate
since it does not clearly specify what activities constitute profession and what activities do
not.

Section 28, deals with the income is chargeable to tax under the head “Profits and gains of
business or profession”.
Income under the heads “Profits and gains of business or profession” and “Income from
other sources” shall be computed in accordance with method of accounting regularly
employed by the assessee. There are two main methods of accounting—mercantile system
and cash system.
The term ‘speculation’ has not been exhaustively defined in the income-tax Act, but it
normally denotes the meaning commonly assigned to it in commercial practice. However,
Section 43(5) defines the expression “speculative transaction” as “a transaction in which a
contract for the purchase or sale of any commodity including stocks and shares is
periodically or ultimately settled otherwise than by the actual delivery or transfer of the
commodity or scrips”.

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