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Issues Involved:
1. Genuineness of the transaction. 2. Classification of the loss as speculative. Issue-wise Detailed Analysis: 1. Genuineness of the Transaction: The appellant filed an appeal against the order of the CIT(A), challenging the disallowance of a loss of Rs. 51,425 claimed from the business of shares. During the assessment, the Assessing Officer (AO) scrutinized the transactions and observed that the appellant had not made full payment for the shares at the time of purchase or the following day, which contradicted the Bye-laws of the Delhi Stock Exchange. The AO noted that the shares were purchased and sold to the same parties, raising doubts about the genuineness of the transactions. The AO disallowed the loss, deeming the transactions as speculative. The CIT(A) upheld the AO's decision, emphasizing that the transactions did not comply with the Delhi Stock Exchange Rules and the appellant did not remit the purchase price of the shares. The CIT(A) found that the brokers received only small advances, and the actual delivery of shares was not proved. Consequently, the transactions were treated as ingenuine and speculative. The appellant's counsel argued that the transactions were genuine, as the brokers confirmed the dealings. However, the tribunal found circumstantial evidence that cast doubt on the transactions' genuineness. The shares were purchased at a higher price and sold at a significantly lower price to the same brokers, and there was no evidence of effective delivery of shares in the appellant's name. The tribunal concluded that the transactions were not proper business transactions but compensatory payments for unclear transactions. 2. Classification of the Loss as Speculative: Section 43(5) of the Income-tax Act defines a speculative transaction as one settled otherwise than by actual delivery or transfer of the commodity or scrips. The tribunal noted that there was no transfer of shares in the appellant's name, and the share transfer application form was not submitted to the company for transferring the shares to the appellant. The tribunal emphasized that the legislature intended for transactions to be settled with actual delivery and transfer of scrips. The Supreme Court's interpretation in the case of Jute Investment Co. Ltd. vs Commissioner of Income-tax was cited, which clarified that speculative transactions involve real or factual delivery, not notional or constructive delivery. The tribunal reiterated that for income-tax purposes, speculative transactions are defined by actual delivery or transfer of the commodity or scrips, as opposed to notional delivery. The tribunal concluded that the transactions entered by the appellant with the share brokers were speculative. Consequently, the loss incurred in such transactions could not be adjusted with profits from other business activities. The appeal of the appellant was dismissed. Conclusion: The appeal was dismissed on the grounds that the transactions were not genuine and were speculative in nature. The loss claimed by the appellant was disallowed, as it did not involve actual delivery or transfer of shares, aligning with the legal definition of speculative transactions.
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