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TMI Blog1983 (7) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... red by PATHAK J.- In this tax reference made under s. 257 of the Income-tax Act, 1961, we are called upon to express our opinion on the following question of law : " Whether, on the facts and in the circumstances of the case, the Tribunal was right in confirming the order of the Appellate Assistant Commissioner that the loss suffered by the assessee was not a loss incurred in a speculative transaction within the meaning of sec. 43(5) of the Income-tax Act, 1961 ? " The assessee, M/s. Shantilal Pvt. Ltd., Bombay, is a private limited company. In the assessment proceedings for the assessment year 1971-72, it claimed a sum of Rs.. 1,50,000 paid by it as damages to M/s. Medical Service Centre as a business loss. During the previous year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18, 1976. The Commissioner of Income-tax applied in reference for a decision on the question of law set out earlier, and, in view of an apparent conflict between different High Courts on the point, the Tribunal has made this reference. There is no doubt that the arbitration award granting compensation to M/s. Medical Service Centre proceeds on the footing that there was breach of contract. The Tribunal took the view that the award of damages for the breach of a contract did not bring the transaction within the definition of "speculative transaction " set forth in sub-s. (5) of s. 43, I.T. Act, 1961. In this, the Tribunal found support in the view expressed by the Calcutta High Court in CIT v. Pioneer Trading Co. P. Ltd. [1968] 70 ITR 347 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s entitled to receive from the party who broke the contract compensation for any loss or damage caused to him thereby. There is no reason why the sense conveyed by the law relating to contracts should not be imported into the definition of " speculative transaction ". The award of damages for the breach of a contract is not the same thing as a party to the contract accepting satisfaction of the contract otherwise than in accordance with the original terms thereof. It may be that in a general sense the layman would understand that the contract must be regarded as settled when damages are paid by way of compensation for its breach. What is really settled by the award of such damages and their acceptance by the aggrieved party is the dispute b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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