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TMI Blog1985 (10) TMI 60X X X X Extracts X X X X X X X X Extracts X X X X ..... at since there was no written agreement between the parties, the compensation paid for non-fulfilment of the contracts was treated as speculative in nature and was disallowed. On appeal, the assessee furnished before the Appellate Assistant Commissioner the following details regarding the claim of Rs. 62,060. ---------------------------------------------------------------------------------------------------------------------------------------------------Name of the party Date of Quantity Date and Date of Amount Rate at contract contracted payment payment paid which of advance of com- paid received pensation ---------------------------------------------------------------------------------------------------------------------------------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ility. It rejected the contention of the Department that it was a speculative loss within the meaning of section 43(5) of the Income-tax Act, 1961 (hereinafter called " the Act "). In coming to the conclusion, the Tribunal relied on the decisions of the Calcutta High Court in CIT v. Pioneer Trading Co. Pvt. Ltd. [1968] 70 ITR 347 and Daulatram Rawatmull v. CIT [1970] 78 ITR 503 and the decision of the Mysore High Court in Bhandari Rajmal Kushalraj v. CIT [1974] 96 ITR 401. The conclusion was arrived at after recording the following observations: " We have gone through the details of the various transactions and find that in respect of all the transactions in dispute, the settlement was made long after the date of the delivery as contempla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act on the part of the assessee or ever took the matter to any court of law. All that we find from the record is that after the date of the delivery of the goods lapsed, the assessee settled the contracts by paying compensation. Beyond that, there is no record. However, in addition to this, we have the finding of the Tribunal to the effect that from the details of the transactions furnished to them, they were of the opinion that all the transactions and the disputes were settled long after the date of the (intended) delivery as contemplated in the contracts. Therefore, the only material which was before the Tribunal for not applying section 43(5) of the Act was that the transactions in disputes were settled long after the date of the (inten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciding that case (at pp. 60 and 61): " Is a contract for the purchase or sale of any commodity settled when no actual delivery or transfer of the commodity is effected, and instead, compensation is awarded under an arbitration award as damages for a breach of the contract ? A contract can be said to be settled if instead of effecting the delivery or transfer of the commodity envisaged by the contract, the promisee, in terms of section 63 of the Contract Act, accepts, instead of it, any satisfaction which he thinks fit. It is quite another matter where instead of such acceptance, the parties raise a dispute and no agreement can be reached for discharge of the contract. There is a breach of the contract and by virtue of section 73 of the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransaction, but if the contract is settled and under the settlement of the contract, damages are paid, it would be a speculative transaction. In the present case, we have to see whether the dispute was settled or the contract was settled. As already noticed, there is no evidence whatsoever that the other party ever raised any dispute. There is no evidence as to why the assessee was not able to perform his part of the contract. There is no evidence as to how the damages were calculated. In order to prove the damages, it was for the assessee to show that when the contract was entered into, the agreed rate was such and such and when the time for performance of the contract matured, the rate of those goods was such and such, and on the differen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peculative nature as they clearly come within the ambit of section 43(5) of the Act. On behalf of the assessee, reliance was placed on CIT v. Bhagwan Dass Rameshwar Dayal [1984] 149 ITR 387, a decision of the Division Bench of the Delhi High Court. It was held in that case that even if there is no supply of the contracted goods, yet the transaction cannot be speculative. There is no quarrel within his proposition. That is why, the learned judges of the Delhi High Court observed that even without actual delivery, all settlements cannot be termed as speculative and it will depend on the facts of each case. In that case, the learned judges found that part of the oil was supplied under the first three contracts and under the fourth contract, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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