Deeming provision under Explanation to section 73 of the Income Tax Act.
The computation of Long term and Short term capital gains is not applicable to companies in view of deeming provision under Explanation to Section 73 of the Income Tax Act
According to the Explanation to section 73 reads as under:
“Where any part of the business of a company (other than a company whose gross total income consists mainly of income which is chargeable under the heads ‘Interest on Securities’, ‘Income from House Property’, ‘Capital Gains’ and ‘Income from Other Sources’, or a company the principal business of which is the business of banking or the granting of loans and advances) consists in the purchase and sale of shares of other companies, such company shall, for the purposes of this section, be deemed to be carried on a speculation business to the extent to which the business consists of the purchase and sale of such shares.”
Explanation to Section 73 is a deeming provision wherein if specified conditions are satisfied, purchase and sale of shares are deemed speculation activities. Explanation to Section 73 attract only to a company assessee. Again only if the following conditions are satisfied the provisions in Explanation to Section 73 does not attracts to the companies also. The conditions are :-
If the gross total income of the company includes income mainly from the following heads i.e." Interest on Securities", "Income from House Property", "Capital Gains" and " Income from Other sources". OR The principal business of the company is the business of banking or the granting of loans and advances.
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