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TMI Blog1967 (8) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... evious year for the assessment year 1960-61, the assessee entered into certain forward contracts of sale of kapas (unginned cotton in pods) and cotton bales. Out of these contracts, barring a contract with Messrs. J. Chunilal & Company which resulted in a loss of Rs. 9,446, all the other contracts were ultimately settled otherwise than by the actual delivery of the goods and they resulted in a loss of Rs. 66,256. These contracts were admittedly covered by the second Explanation to section 24(1) and if they did not fall within proviso (a), they would be speculative transactions within the meaning of the first proviso to section 24(1) and by reason of that proviso the loss of Rs. 66,256 sustained in these contracts would not be liable to be s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee had entered into forward contracts of purchase with agriculturists but took the view that even if such forward contracts of purchase were entered into by the assessee, forward contracts of sale entered into by the assessee for the purpose of guarding against loss through future price fluctuations in respect of the forward contracts of purchase were not covered by proviso (a) and the forward contracts of sale were, therefore, speculative transactions and the loss arising from them was not liable to be set off against the other business income of the assessee. The assessee then applied for a reference and on the application of the assessee, the following question, namely: "Whether on the facts and in the circumstances of the case, the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch contract, under the proviso, has to be hedging contract entered into by the person concerned for the purpose of guarding himself against loss through future price fluctuations in respect of his "contracts for actual delivery of goods manufactured by him or merchandise sold by him." It is by way of hedging "against contracts for actual delivery of goods manufactured by him or merchandise sold by him" that a person can enter into "a contract in respect of raw materials or merchandise" within the meaning of the proviso. Now in the case of a person carrying on manufacturing business "contracts for actual delivery of goods manufactured by him" would obviously be contracts of sale by such person and in respect of such forward contracts of sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f sale and they do not include forward contracts of purchase. If forward contracts of purchase were intended to be included, it is difficult to see why the legislature should have used the words "contracts for actual delivery of merchandise sold by him". These words would be quite inappropriate when used in reference to forward contracts of purchase. It is, therefore, clear that proviso (a) takes out from the scope and ambit of the second Explanation only forward contracts of purchase of raw materials or merchandise entered into by an assessee in the course of his manufacturing or merchanting business to guard against loss through future price fluctuations in respect of his forward contracts of sale for actual delivery of goods manufactured ..... X X X X Extracts X X X X X X X X Extracts X X X X
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