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Issues involved: Determination of whether the transactions were hedging contracts or speculative transactions, applicability of set-off for losses incurred in speculative transactions.
Summary: The High Court of Allahabad, in the case, considered the issue of whether the transactions in question were hedging contracts or speculative transactions. The Income-tax Appellate Tribunal had disallowed the assessee from arguing that the transactions were hedging contracts based on the assumption that the assessee had admitted before the Appellate Assistant Commissioner that the transactions were speculative. However, it was found that the assessee had not unqualifiedly withdrawn the objection challenging the finding of the Income-tax Officer. The Appellate Assistant Commissioner had observed that the losses were incurred in speculative transactions, but the assessee, after legal advice, did not seriously contend otherwise. The Tribunal did not allow the assessee to raise arguments on the nature of the losses, citing the earlier admission. The High Court held that the assessee's conduct did not amount to an admission of fact or unqualified withdrawal of the ground taken before the Appellate Assistant Commissioner. The Court found no legal principle justifying such conduct to be within the doctrine of estoppel. In conclusion, the Court ruled in favor of the assessee, allowing the set-off for losses incurred in speculative transactions against income from other business. The costs were assessed at Rs. 200, payable by the revenue to the assessee.
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