PWSI Ltd. engaged in the business of TMT manufacturing also effected the sales and purchase of shares of other Companies. It suffered loss from such transactions: Whether such Company can set off its losses from share tr

As per Section 73(1) of the Income tax Act, 1961, loss in speculation business can be set-off only against the profit of any other speculation business and not against any other business or professional Income. Explanation to section 73(1) clarifies that where any part of the business of a company consists in the purchase and sale of the shares of other companies, such a company shall be deemed to be carrying on speculation business to the extent to which the business consists of the purchase and sale of such shares. However, this deemed provision does not apply, inter alia, to a company, the principal business of which is the business of trading of shares. Since the business of PWSI Ltd. consists of sale and purchase of shares of other companies, the company would be deemed to be carrying on speculation business to the extent of purchase and sale such shares. Thus the loss from speculative business, i.e., loss from share trading cannot be setoff against profit of TMT business of PWSI Ltd. If the principal business of PWSI Ltd. is to sell and purchase of shares of other companies, PWSI Ltd would not be deemed to be carrying on speculation business. In such case, the loss arising from the sale and purchase of shares of other company can be set-off against any other business income. PWSI Ltd. can, accordingly, set-off such losses against its profit from TMT Business.