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TMI Blog1998 (2) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee for cancelling the contracts for purchase of cotton is not in the nature of a speculation loss ? 2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is justified in holding that the assessee was not carrying on a speculation business and that the contracts entered into for purchase of cotton and the subsequent settlement of the contracts otherwise than by actual delivery of goods, will not constitute a speculation business ?" The assessee had entered into contracts during the previous year relevant to the assessment year in question for the purchase of cotton required for the manufacture of yarn. Two of those contracts had to be cancelled because the assessee decided to produce yarn of higher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s speculative transactions, in view of the definition of speculative transaction set out in section 43(5) of the Act. That provision defines speculative transaction as one for the purchase or sale of any commodity, including stocks and shares, which is periodically or ultimately settled otherwise than by the actual delivery of the commodity or scrips. The proviso to section 43(5)(a) provides that a contract in respect of raw materials or merchandise entered into by a person in the course of his manufacturing or merchanting business to guard against loss through future price fluctuations in respect of his contracts for actual delivery of goods manufactured by him or merchandise sold by him, shall not be deemed to be a speculative transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not amount to carrying on speculative business for the purpose of Explanation 2 to section 28 of the Act. Counsel for the Revenue invited our attention to the decision of the Supreme Court in the case of CIT v. Shantilal Private Limited [1983] 144 ITR 57, wherein the court dealt with a case of an award made pursuant to a claim for damages on account of breach of contract, and held that such arbitration award does not amount to settlement of contract for the purpose of section 43(5) of the Act. That judgment is not of any assistance to the Revenue in this case. Counsel also referred to a decision of the Bombay High Court in the case of CIT v. Kanmani Tubes Ltd. [1994] 207 ITR 298, wherein the court observed that in deciding the charact ..... X X X X Extracts X X X X X X X X Extracts X X X X
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