9911796707
TMI Blog1993 (10) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... in the circumstances of the case, the assessee is entitled to set off of loss of Rs. 36,192 against profit of business which was not of speculative nature ?" These questions arise in the background of the fact that the assessee, Messrs. Panachand Khemchand, submitted its income-tax return for the assessment year 1975-76 and on scrutiny of the return, the Income-tax Officer held as under : "On scrutiny of the books of account it is noticed that the firm has claimed a loss of Rs. 36,192. In this connection, details as to how this claim of loss has been made were filed. As per this letter, it is explained that the firm agreed for the purchase of oil from Krishna Oil Mill on December 15, 1973, through Rajkot Broker. This was sold to Panach ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansaction as defined in section 43(5) of the Act. Admittedly, because of the ban imposed by the Gujarat Government on the sale of oil, the present transaction had to be cancelled. After cancellation of the transaction, damages of Rs. 36,192 were paid by settling the dispute: In such a case, applying the test laid down by the Supreme Court in the case of CIT v. Shantilal P. Ltd. [1983] 144 ITR 57, it cannot be said that it was a speculative transaction. In that case, the court considered the relevant provisions of section 43(5) read with section 63 of the Contract Act and has held as under (at page 60) : "A contract can be said to be settled if instead of effecting the delivery or transfer of the commodity envisaged by the contract the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e which must prevail in sub-section (5) of section 43. Accordingly, we hold that a trans action cannot be described as a 'speculative transaction' within the meaning of sub-section (5) of section 43, Income-tax Act, 1961, where there is a breach of the contract and on a dispute between the parties damages are awarded as compensation by an arbitration award." Hence, in the present case, the assessee is entitled to set off of loss of Rs. 36,192 against the profit of business which was not of speculative nature. Hence, question No. 2 is answered in the affirmative, in favour of the assessee and against the Revenue. With regard to question No. 1, in view of the aforesaid finding, it is not required to be dealt with in the facts and circumstan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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