Share allotment under IPO not ‘purchase’; Sec.73-explanation on deemed speculative business inapplicable

Gujarat HC reverses ITAT Special Bench order for AY 2001-02, allotment of shares pursuant to application in Public Issue doesn’t amount to `purchase’ under Explanation to Sec. 73; Explanation to Sec. 73 provides that assessee dealing in share-transactions shall be deemed to be carrying on speculation business with respect to such transaction; Accepts assessee’s reliance on SC ruling in Khoday Distilleries Ltd. wherein in the context of gift tax it was held that allotment of shares (by way of application in public issue) doesn’t amount to purchase, also distinguishes ITAT’s reliance on SC decision in T.N. Arvinda Reddy; Appreciating the ‘vital’ difference between ‘creation’ and ‘transfer’ of shares as enunciated by SC in Khoday Distilleries Ltd., observes that “allotment of shares” indicate creation of shares by appropriation out of unappropriated share capital to a particular person; Accordingly rules that “whichever rule of interpretation is followed, whether literal or object wise or purposive, the transactions of the assessee cannot imaginably be deemed to be a speculative business”:HC