9911796707
TMI Blog1973 (4) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... the previous year ending April 12, 1960, relevant to the assessment-year 1960-61, the assessee claimed a loss of Rs. 2,04,746 as against Rs. 41,785, the gross profit shown in the return. Similarly, in the previous year ending April 12, 1961, relevant to the assessment year 1961-62, the assessee claimed a sum of Rs. 17,000 as business loss in its return. The assessee claim was rejected by the Income-tax Officer on the ground that the said two sums represented losses in speculative transactions within the meaning of Explanation 2 to section 24(1) and that, therefore, it cannot be allowed as a normal business loss. There were appeals to the Appellate Assistant Commissioner. The Appellate Assistant Commissioner, however, upheld the Income-tax Officer's view. On further appeals to the Income-tax Appellate Tribunal, the Tribunal, however, upheld the contention of the assessee that the impugned transactions in respect of which the losses occurred had been entered into in the course of its merchanting business, to guard against loss through future price fluctuations in the cloth and yarn purchases made by the assessee from various mills and that, as such, the transactions in question ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner of Income-tax 2) this court had considered the scope of section 43(5) of the Income-tax Act of 1961 which corresponds to Explanation 2 to section 24(1) of the Indian Income-tax Act of 1922. In that case the court took the view that the definition of " speculative transaction " in section 43(5) gives a simple test in deciding for the purpose of income-tax what a speculative transaction means, and expressed : " If a contract for sale or purchase is ultimately settled and no actual delivery of the goods was effected under the settlement, then it is a speculative transaction. The requirement under section 30 of the Contract Act of the existence of the intention of the parties even at the time of original contract not to give or take delivery of the goods to make it speculative or wagering transaction is dispensed with for the purpose of income-tax. If the actual delivery of the goods is not given under the settlement of the contract, then the intention of the parties at the time of the contract is immaterial." In this case it has been conceded at all stages by the assessee that the transactions in respect of which the losses in question have occurred are speculative transact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... curred as losses were such as to come under clause (a) of the third proviso. Once the assessee is not in a position to show that these transactions are covered by a clause (a) of the third proviso to section 24(1), then the transactions cannot be taken out of the category of speculative transactions. We are, therefore, of the view that, in any event, the above two, sums have to be treated as speculative losses. Taking the rest of the amounts, that is, the loss of Rs. 6,492 in cloth business and Rs. 1,52,500 in yarn business, it is seen that though the transactions in relation to these amounts are clearly numerous, the nature of all the transactions, is substantially the same. Therefore, we propose to consider the nature of only one transaction in cloth business and another in yarn business. On 12th November, 1959, the assessee entered into a contract with Virudhunagar Textiles Ltd. for the purchase, of 100 bales of gada cloth for delivery in December, 1959, at Rs. 0-14-0 per yard. On November 14, 1959, it entered into a contract for the sale of 100 bales of gada cloth manufactured by Virudhunagar Textiles Ltd. to one R. S. Krishnamachari of Madurai for December delivery at Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .. sold by him..shall not be deemed to be a speculative transaction." This makes it clear that it is only those contracts of purchase entered into by sit assessee to guard against loss through future price fluctuations in respect of his contracts of sale for actual delivery of the goods can be taken to be covered by clause (a). On the wording of clause (a) it is not possible to accept the view of the Tribunal that it covers both purchase and sale transactions. For a transaction to come under clause (a) it should be out entered into by an assessee to guard against loss through future price fluctuations in respect of his sale contracts and, therefore, clause (a) cannot at all take in a sale contract, even though it is intended to guard against loss through price fluctuations in respect of the contract for the purchase of the goods. The Tribunal has also expressed the view that there wed not be actual correlation--contract to contract--but that it is sufficient if a transaction either by way of purchase or sale is entered into with a view to guard against any future loss in that particular line of business. The Tribunal also took the view that the words ' in respect of his contracts ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
