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TMI Blog2001 (9) TMI 234X X X X Extracts X X X X X X X X Extracts X X X X ..... er (AO, in short) noted that during the course of assessment proceedings the assessee produced vouchers of the following parties:- ------------------------------------------------------------------------------ (1) Sri Kashi Viswanath Seva Samity Rs. 25,000.00 (2) Bharat Relief Samity Rs. 10,000.00 (3) Sri Vishudhananda Hospital Rs. 33,000.00 (4) Baba Kali Kamliwalla Rs. 25,000.00 (5) Kashi Bhavan Sabha Rs. 10,000.00 & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; Rs. 6,000.00 (6) Sri Brajeswar Samity Rs. 6,000.00 ------------------------------------------------------------------------------ Therefore, the Assessing Officer disallowed the sum of Rs.2,00,000 treating the same as donation in the nature. On appeal, the CIT(A) confirmed the said disallowance. However, the CIT(A) held that deduction under section 80G of the Act may be allowed on such donations which are eligible for such deduction. Still aggrieved, the assessee is in further appeal before us. 3. We have heard the rival contentions of the parties and have gone through the orders of the authorities below. We have also gone through the paper book filed by the assessee wherein details of advertisement expenses are given. The learned counsel for the assessee contended that no distinction need be drawn between expenditure on advertisement in souvenirs and other types of advertisements, and thus submitted that the expenditure on advertisement in souvenirs is an allowable expenditure. The learned counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrying on of the business. Hence, it must be held that the expenditure was incurred or laid out by the assessee wholly and exclusively for the purpose of its trade.' Therefore, in view of the aforesaid decision of the Hon'ble Calcutta High Court and as well of aforesaid Board's circular it is clear that the expenditure on advertisements in souvenirs incurred in carrying out the business activities of the company are allowable expenditure. Hence, the Assessing Officer was not right in making distinction between the expenditure on advertisements in souvenirs and newspapers/hoardings etc. but as rightly pointed out by the Assessing Officer that some of the expenses are of donations in nature, which has been incurred in the garb of advertisement expenses are inadmissible. Some of the expenses, which are of donations in nature, have been discussed in the assessment order. We have examined them and found so. It is, therefore, clear that total sum of Rs.2,55,500 has not been incurred by the assessee on advertisements wholly and exclusively for the purpose of business and hence, some disallowance is called for. In view of the facts and circumstances of the case and also in view of the na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation loss. Being further aggrieved, the assessee is in appeal before us. 9. It is contended by the learned counsel for the assessee that in order to execute the contract with the Directorate General of Supplies & Disposals, Government of India, the assessee could not perform the contract entered into with other parties on due date. The assessee has submitted the details of the contract and loss arising out of the same in the following way:- ------------------------------------------------------------------------------ Sales con- Date Payer's Purchase Date Amount tract No. name contract No. Rs. ------------------------------------------------------------------------------ 90080 28-12-89 Joshi Jute Corporation&nb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsp; 2,60,540 ------------ ------------------------------------------------------------------------------ It was further contended that on the date of delivery, the assessee had no other option but to settle its contract with those parties. Settlement was made by paying the difference between the contracfprice and the market price on the due date of supply. It was, therefore, contended that the sum of Rs.2,60,540 should be allowed as a hedging loss and not to be treated as speculation loss. In support of his contention the learned counsel for the assessee relied on the following decisions:- (1) CIT v. Shantilal (P.) Ltd. [1983] 144 ITR 57 (SC); (2) CIT v. Pioneer Trading Co. (P.) Ltd [1968] 70 ITR 347 (Cal.); (3) CIT v. Ramchandra Shivnarain [1993] 201 ITR 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n by the actual delivery or transfer of the commodity or scrips Provided that for the purposes of this clause-- (a) 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; or ------------------------------------------------------------------------------ (b)** (c)** ------------------------------------------------------------------------------ shall not be deemed to be a speculative transaction." It is clear from the aforesaid provisions of section 43(5) of the Act that a transaction in which a contract for the purchase or sale of a commodity is settled otherwise than by actual delivery or transfer of the commodity has been defined as a speculative transaction. However, certain species of such transactions entered into under specific circumstances have been taken out of the definition by virtue of three provisions thereto. The relevant proviso for our purpose is proviso (a) which clearly states that for the purpose of this clause a co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quite another matter where instead of such acceptance the parties raise a dispute and no agreement can be reached for a discharged of the contract. There is a breach of the contract and by virtue of section 73 of the Contract Act the party suffering by such breach becomes entitled to receive from the party who broke the contract compensation for any loss or damage caused to him thereby. The award of damages for the breach of a contract is not the same thing as a party to the contract accepting satisfaction of the contract otherwise than in accordance with the original terms thereof. As section 43(5) of the Act speaks of a settlement of the contract, we are concerned with that sense of law, which must prevail in sub-section (5) of section 43 of the Act. Therefore, a transaction cannot be described as a 'speculative transaction' within the meaning, of sub-section (5) of section 43 of the Act, where there is a breach of the contract and on a dispute between the parties damages are awarded as compensation by an arbitration award. 14. In the instant case, a contract for sale of goods manufactured by the assessee has been ultimately settled on the respective date of delivery by paying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tracts: (i) contract for actual delivery of goods manufactured by the assessee or merchandise sold by him; and (ii) a contract in respect of raw materials or merchandise entered into in the course of the assessee's manufacturing or merchanting business to safeguard against loss through future price fluctuations. Thus, unless the assessee shows that there was some existing contract in respect of which he was likely to suffer a loss because of future price fluctuations and that it was to safeguard such loss that he entered into forward contracts of sale, the assessee cannot claim the benefit of a hedging contract. In the instant case, there is no evidence to show that the forward contract entered into by the assessee, which were ultimately settled by payment of the difference in price, was to guard against loss through future price fluctuations in respect of those contracts of sale for actual delivery. It is clearly stated by the assessee that with a view to execute another contract with Directorate General of Supplies & Disposals (in short, DGS & D) within time so as to save himself from damages which might be resulted due to late delivery, the assessee could not perform other contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section (5) of section 143 of the Act where there is a breach of contract and on a dispute between the parties damages are awarded as compensation by an arbitration award. The decision of the Hon'ble Calcutta High Court in the case of CIT v. Pioneer Trading Co. (P.) Ltd. was approved by the Hon'ble Supreme Court in the above-referred case of Shantilal (P.) Ltd. As discussed and found above by us, in the present case, the assessee admittedly settled the contract on due date of delivery by entering into fresh contract for re-purchasing goods without giving or taking actual delivery of goods but by paying the difference between the contract price and market price on the due date of delivery. No dispute ever arose between the parties. No damages were awarded as compensation by an arbitration award. Hence, the present case is a case of settlement of the contract' and not of a 'Breach of Contract'. Admittedly, the assessee's contention given in writing to the effect that 'on the date of delivery, we had no other option but to settle our contract with those parties. Settlement was made by paying compensation which was the difference between the contract price and market price on the due d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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