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Issues Involved:
1. Whether the loss of Rs. 63,892 in hessian cloth suffered by the applicant was rightly treated as a speculation loss. Detailed Analysis: 1. Nature of the Transaction: The primary issue was whether the transaction of purchase and sale of 900 bales of hessian cloth by the assessee constituted a speculative transaction under the Indian Income-tax Act, 1922. The assessee contended that the transactions were genuine business transactions involving actual delivery of goods, while the Income-tax authorities treated the loss as speculation loss. 2. Sequence of Events: The assessee, a private limited company, instructed M/s. Ispahani Ltd. to purchase 900 bales of hessian cloth. M/s. Ispahani Ltd. purchased these bales as part of a larger purchase of 1,500 bales from M/s. Girdharlal & Co. The assessee later instructed M/s. Ispahani Ltd. to sell the 900 bales in two lots of 600 and 300 bales. The transactions were acknowledged and the loss was calculated as the difference between the purchase and sale prices. 3. Tribunal's Findings: The Tribunal found that no actual delivery of the 900 bales was taken or given. The purchase and sale transactions were conducted through pucca delivery orders, but there was no earmarking of the specific 900 bales for the assessee. M/s. Ispahani Ltd. did not continuously hold stock to show that they had made purchases for the assessee. The Tribunal concluded that the transactions were speculative in nature as there was no actual delivery of goods. 4. Assessee's Argument: The assessee argued that the transactions should not be considered speculative as they involved the tendering of pucca delivery orders, which amounted to actual delivery of goods. The assessee relied on the Supreme Court decision in Raghunath Prasad Poddar v. Commissioner of Income-tax, which held that transfer of pucca delivery orders could amount to actual delivery or transfer of commodities. 5. Court's Analysis: The court distinguished the present case from the Supreme Court decision. It noted that in the Supreme Court case, the pucca delivery orders were entirely dealt with and disposed of, amounting to completed purchases and sales. In the present case, there was no earmarking of the 900 bales, and the transactions remained agreements to purchase and sell without actual delivery or transfer of commodities. The court found no material on record to show that the ultimate buyer had taken actual delivery of the goods, which would have perfected the title of intermediate transferees. 6. Conclusion: The court upheld the Tribunal's view that the loss of Rs. 63,892 was a speculation loss. The transactions did not involve actual delivery of goods, and the agreements remained speculative in nature. The question was answered in the affirmative and against the assessee, who was ordered to pay the costs of the reference. Summary: The High Court of Bombay determined that the loss of Rs. 63,892 in hessian cloth suffered by the assessee was rightly treated as a speculation loss. The transactions involved agreements to purchase and sell without actual delivery of goods, and the Tribunal's findings were upheld. The court distinguished the case from the Supreme Court decision in Raghunath Prasad Poddar v. Commissioner of Income-tax, noting the absence of earmarking and actual delivery in the present case. The assessee's contention was rejected, and the question was answered against the assessee.
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