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Issues:
1. Determination of whether the loss claimed by the assessee was speculation loss. 2. Assessment of whether the loss incurred by the assessee was incidental to the business and allowable. 3. Evaluation of whether the transactions in question constituted speculative transactions due to the absence of actual delivery of shares. Analysis: The case involved the assessment of a loss claimed by an individual engaged in the share business for the assessment year 1975-76. The Income-tax Officer initially disallowed the loss, categorizing it as speculation loss due to the absence of actual delivery of shares during transactions. The Appellate Assistant Commissioner upheld this decision based on the same reasoning. However, the Tribunal disagreed, stating that the loss was not speculative as the assessee had sold shares from his stock in hand, considering it incidental to the business and allowed the loss. The questions referred to the court pertained to the interpretation of section 43 of the Income-tax Act, specifically dealing with speculative transactions. The court referred to a previous case, CIT v. Mohanlal Ranchhoddas, where it was established that hedging transactions to guard against price fluctuations are not speculative if certain conditions are met. The court emphasized that the genuineness of the transactions and the intent to hedge against price fluctuations are crucial factors in determining the nature of the transactions. Based on the findings of the Tribunal and the principles established in previous cases, the court concluded that the assessee's transactions were not speculative but were legitimate hedging transactions to guard against price fluctuations. The court affirmed the Tribunal's decision, stating that the assessee was entitled to claim the hedging loss. Consequently, the court answered all the questions in favor of the assessee and against the Revenue, without any order as to costs.
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