9911796707
TMI Blog1975 (7) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... see for the first time in its history entered into certain transactions in jute. On April 17, 1958, the assessee had contracted to purchase 1,100 bales of B-Twill and 2,500 bales of corn sacks ; the contract for B-Twill was with two parties, M/s. Raghunath & Sons (P.) Ltd. for 500 bales and M/s. Mahadeo Ramkumar for 600 bales. The corn sacks were all purchased from Tulsidar Jewaraj under three contracts for 800 bales, 1,000 bales and 700 bales respectively. On June 18, 1958, the assessee entered into a contract with M/s. Lachhminarain Kanoria & Co. to sell the aforesaid quantities of B-Twill and corn sacks. The assessee had no godown for keeping the goods and had not handled them. The goods were in the godown of the mills and only the delivery orders addressed to the mills changed hands. The amount realised on sale to M/s. Lachhminarain Kanoria & Co. came to Rs. 10,49,865. The assessee had, however, purchased the corn sacks and B-Twill for Rs. 11,48,399. The transactions thus resulted in a loss of Rs. 98,534 to the assessee and the assessee claimed adjustment of this loss in the computation of its income for the assessment year 1959-60. The Income-tax Officer held that the transact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness shall be deemed to be distinct and separate from any other business. Explanation 2.---A speculative transaction means a transaction in which a contract for purchase and sale of any commodity including stocks and shares is periodically or ultimately settled otherwise than by the actual delivery or transfer of the commodity or scrips. (The rest of the section is also not relevant.) " Before us both sides admitted that the question is covered by the decision of this court in Raghunath Prasad Poddar v. Commissioner of Income-tax, where it was held that such transactions were not speculative transactions within the meaning of Explanation 2 to section 24(1). The learned counsel for the revenue, however, prayed for reconsideration of the decision on a fresh examination of the problem. In Ragunath Prasad Poddar v. Commissioner of Income-tax , the assessee, a company dealing in jute and jute goods, purchased pucca delivery orders (in short P. D. Os.) in respect of gunny bags from various parties after paying the full price of the goods covered by the delivery orders and transferred those P. D. Os. to buyers after receiving the price fixed for the sale of those goods. The Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hand Rataria's case, this court was interpreting the words " actual delivery of possession " occurring in section 2(1)(b)(i) of the West Bengal Jute Goods Future Ordinance, 1949. The question for determination in that case was whether certain contracts between the appellant and the respondents could be called contracts involving actual delivery of possession of the goods concerned. Referring to the definition of " delivery " in section 2(2) of the Indian Sale of Goods Act, 1930, it was observed that this would include actual delivery as also symbolic or constructive delivery, and having regard to the mischief which was sought to be averted by the promulgation of the Ordinance---to prevent persons who dealt in differences only and never intended to take delivery under any circumstances---it was held that the intendment of the Ordinance was that " actual delivery of possession " was actual delivery as contrasted with mere dealings in differences and such actual delivery included within its scope symbolic and constructive delivery of possession. With respect, these observations made in quite a different context do not appear to us to be of assistance in interpreting Explanation 2 to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gunny bags, purchased gunnies from the mills on terms of written contracts which were on printed forms. These contracts were entered into by brokers acting for the respondent who sent him " Bought-Notes " setting out the terms upon which the purchases had been effected from the mills. The mills having received a part of the purchase money in terms of the contract issued delivery orders directing the delivery of goods as per the contract. Instead of taking delivery himself, the respondent endorsed the delivery orders and these passed through several hands before the ultimate holder of the delivery orders presented them to the mills and obtained delivery of the gunnies on payment. The question that arose for decision was whether the transactions entered into by the respondent were mere sales of delivery orders or sales of goods so as to bring them to charge under section 3 of the said Act. At the date of the contract for purchase by the respondent, the goods which were the subject-matter of the purchase were not appropriated to the contract so that there was no completed sale since no property passed, but only an agreement for sale. In considering the effect of the position that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsaction within the meaning of Explanation 2 if actual delivery of the commodity or the scrips has taken place ; on the other hand, a transaction which is not otherwise speculative in nature may yet be speculative according to Explanation 2 if there is no actual delivery of the commodity or the scrips. The Explanation does not invalidate speculative transactions which are otherwise legal but gives a special meaning to that expression for purposes of income-tax only. In D. M. Wadhwana v. Commissioner of Income-tax, on which the Tribunal's decision in this case is based, the Calcutta High Court observed : " The Explanation to section 24(1), however, does not prevent persons from entering into contracts in which the buyers and sellers may not actually hand over the goods physically. The Explanation is only designed at segregating for income-tax purposes loss sustained in transactions of a certain kind. It may be that such transactions are not speculative in the light of section 30 of the Contract Act ... In enacting the Explanation 2 of section 24(1) of the Income-tax Act, the legislature did not intend to affect any transaction of sale wherein the goods were not physically delivere ..... X X X X Extracts X X X X X X X X Extracts X X X X
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