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Issues Involved:
1. Whether 'blank transfer' of shares constitutes 'actual delivery' under section 43(5) of the Income-tax Act, 1961. 2. Whether the loss of Rs. 2,73,053 can be set off against business income of the assessee. Issue-wise Detailed Analysis: 1. Whether 'blank transfer' of shares constitutes 'actual delivery' under section 43(5) of the Income-tax Act, 1961: The Tribunal and the Commissioner of Income-tax (Appeals) had to determine if the 'blank transfer' of shares, as recognized by section 108(1A) of the Companies Act, 1956, amounts to 'actual delivery' under section 43(5) of the Income-tax Act, 1961. The Assessing Officer initially inferred that the transactions were speculative because the shares were not registered in the assessee's name, and no dividends were received. However, the Commissioner of Income-tax (Appeals) found that actual delivery of shares occurred through purchase vouchers, and this was confirmed by Bharat Bhushan and Company. The Tribunal upheld this finding, emphasizing that the shares were delivered as blank transfers, which is legally recognized under section 108(1A) of the Companies Act. The High Court clarified that 'actual delivery' for the purposes of section 43(5) means real as opposed to notional delivery, citing the Supreme Court's ruling in Davenport and Co. (P.) Ltd. v. CIT. The Court concluded that the transaction involved actual delivery of shares, making it a non-speculative transaction. 2. Whether the loss of Rs. 2,73,053 can be set off against business income of the assessee: The Assessing Officer initially disallowed the set-off of the loss of Rs. 2,73,053 against the business income, categorizing it as a speculative loss. The Commissioner of Income-tax (Appeals) overturned this decision, stating that the shares were actually delivered, thus the loss was not speculative. The Tribunal affirmed this decision, noting that all transactions were conducted through a registered broker and involved actual delivery of shares. The High Court, agreeing with the Tribunal, reframed the question to focus on whether the actual delivery of share certificates, even without registration in the assessee's name, falls within the purview of section 43(5). The Court concluded that since actual delivery occurred, the transaction was not speculative, and the loss could be set off against other business income. Conclusion: The High Court ruled in favor of the assessee on both issues. It held that the 'blank transfer' of shares constitutes 'actual delivery' under section 43(5) of the Income-tax Act, 1961, and the loss of Rs. 2,73,053 could be set off against the business income of the assessee. The Court emphasized that actual delivery means real delivery as opposed to notional delivery, and the lack of registration in the assessee's name or receipt of dividends does not affect the nature of the transaction.
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