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TMI Blog2016 (6) TMI 556X X X X Extracts X X X X X X X X Extracts X X X X ..... in speculative business not allowable u/s. 73(1) of the Act since the same has to be set off only against profits and gains of another speculative business and not those of the regular business. We are not impressed with this business. Our view is that section 73 of the Act for the purpose of setting off of loss is to be jointly read with section 28 defining categories profits and gains of business and profession as well as section 43(5) of the Act stipulating speculative transactions. Section 28 explanation 2 makes it very clear that where speculative transactions carried on by an assessee are of such a nature to constitute ‘a’ business, the said business is to be taken as distinct and separate from any other business. We repeat that this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 30-03-2009 in cases of M/s. Maruti Cotton Industries, Chamunda Cotton Pvt. Ltd and M/s Arihant Trading Co.; respectively. It pleaded that it had entered into different contracts with the three payees to purchase cotton at fixed rate. The same stood cancelled due to price fluctuations. The assessee has to issue credit note for different amounts. The Assessing Officer sought to treat it as speculative transactions u/s. 43(5) r.w.s. 28(2) of the Act since no actual delivery of cotton commodity. He reproduced assessee s purchase contract and credit note in assessment order dated 27-12-2011 to inter alia conclude that these transactions were speculative once not involving any cotton delivery which did not fell in the category of hedging tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f cotton however, during the intervening period huge price fluctuation has taken place and the cotton was available at a much lower price than the contracted price. So under the circumstances, the contracts had to be cancelled to save the firm from further losses. Since the delivery was not taken therefore, these contracts were settled by making the payment of differential amount to the contractors. There is no dispute with regard to the price at which the contracts were settled. Admittedly, the commodity which was subject matter of the contracts was settled otherwise than by actual delivery of in accordance with the terms of contract. Therefore, these transactions fall within the ambit of speculative transaction as defined u/s 43(5). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. Both parties reiterate their respective stands against and in support of the CIT(A) s findings extracted hereinabove. There is no dispute that this assessee is already in cotton ginning business. It entered into cotton supply contracts. The same would be cancelled in lieu of passing of credit notes due to price fluctuations. The Assessing Officer treated these figures as speculative transactions u/s. 43(5) of the Act not entitled as allowable loss. Learned departmental representative strongly argues that the loss in question is in speculative business not allowable u/s. 73(1) of the Act since the same has to be set off only against profits and gains of another speculative business and not those of the regular business. We are not impre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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