9911796707
|
Home
Issues Involved:
1. Whether the transaction of the sale of 290 quintals of groundnut oil was speculative in nature. 2. Whether the loss of Rs. 13,050 should be treated as a trading loss or a speculative loss. Issue-Wise Detailed Analysis: 1. Whether the transaction of the sale of 290 quintals of groundnut oil was speculative in nature: The primary issue revolves around the nature of the transaction between the assessee and M/s. R.C.S. Vanaspati Industries Ltd. The assessee entered into an agreement on October 26, 1974, for the sale of 290 quintals of groundnut oil at Rs. 795 per quintal, with the goods to be supplied by November 15, 1974. On November 11, 1974, due to a rise in prices, the assessee expressed his inability to supply the goods and opted to pay damages amounting to Rs. 13,050. The Income-tax Officer and the Appellate Assistant Commissioner both considered this transaction to be speculative, as defined under section 43(5) of the Income-tax Act, 1961, which states that a speculative transaction is one in which a contract for the purchase or sale of any commodity is settled otherwise than by actual delivery or transfer of the commodity. 2. Whether the loss of Rs. 13,050 should be treated as a trading loss or a speculative loss: The Tribunal initially held that the loss was a trading loss, not a speculative one. However, the court needed to determine if the transaction fell under the definition of a speculative transaction as per section 43(5). The Supreme Court in Davenport and Co. P. Ltd. v. CIT and CIT v. Shantilal Private Ltd. clarified that a contract is considered settled if the promisee accepts any satisfaction other than the actual delivery, whereas a breach of contract followed by compensation for damages does not constitute a speculative transaction. The court observed that on November 11, 1974, there was no breach of contract since the last date for delivery was November 15, 1974. The settlement on November 11, 1974, was therefore a settlement of the contract itself, not a settlement of a dispute arising from a breach. The court referred to similar judgments, including CIT v. Pioneer Trading Co. P. Ltd. and Daulatram Rawatmull v. CIT, which distinguished between the settlement of a contract and the settlement of a claim arising from a breach. The court concluded that since the settlement occurred before the last date for delivery and before any breach, it fell within the ambit of a speculative transaction under section 43(5). Conclusion: The court concluded that the transaction was speculative in nature and the loss of Rs. 13,050 could not be treated as a trading loss. The Tribunal's decision was reversed, and the loss was deemed to be a speculative loss. The court answered the question in the negative, against the assessee and in favor of the Revenue, determining that the Income-tax Appellate Tribunal was not right in law in treating the loss as a trading loss. There was no order as to costs.
|
