9911796707
|
Home
Issues involved: Determination of whether losses in 'hessian hedge account' and 'gunny hedge account' represent business losses or speculation losses.
Summary: The High Court of Bombay addressed a reference under section 256(1) of the Income-tax Act, 1961, regarding losses claimed by an assessee firm in the 'hessian hedge account' and 'gunny hedge account'. The firm, engaged in the purchase and sale of cloth, jute, and bardan, claimed these losses as business losses for the assessment year 1971-72. The Income-tax Officer initially disallowed the losses, categorizing them as speculation losses due to settlement methods. However, the Appellate Assistant Commissioner and the Tribunal both found that the transactions were part of the merchanting business to guard against future price fluctuations, thus falling under proviso (a) to section 43(5) of the Act, which excludes certain transactions from being speculative. The Tribunal's factual finding was upheld by the High Court, emphasizing that the proviso applies to both manufacturing and merchanting businesses, not limited to manufacturers only. As the requirements of the proviso were met in this case, the Court concluded that the losses represented business losses, not speculation losses. Therefore, the question was answered in favor of the assessee. In conclusion, the High Court of Bombay ruled in favor of the assessee, determining that the losses in the 'hessian hedge account' and 'gunny hedge account' were business losses and not speculation losses. The Court upheld the findings of the Tribunal, emphasizing the applicability of proviso (a) to section 43(5) to merchanting businesses as well, not restricted to manufacturers only. This decision provides clarity on the treatment of such losses in the context of business activities, ensuring compliance with the relevant provisions of the Income-tax Act, 1961.
|
