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2007] 294 ITR 10 [2008] 169 TAXMAN 357 (GAU.) HIGH COURT OF GAUHATI Bhikamchand Betala & Sons * v. Income-tax Officer D. BISWAS AND SMT. A. HAZARIKA, JJ. IT APPEAL NO. 41 OF 2003 AUGUST 21, 2007 Section 43(5) of the Income-tax Act, 1961 - Speculative transactions - Assessment year 1995-96 - During relevant assessment year, assessee purchased certain shares from one 'R' on principal-to-principal basis and resold those shares to same 'R' without taking physical delivery of shares and paid only difference amount of purchase and sale value of shares - In said transaction, assessee incurred loss and claimed deduction of same as share business loss - Whether in view of section 43(5), transaction in question was a speculative transaction and loss arising therefrom being speculation loss could not be allowed - Held, yes FACTS During the relevant assessment year, the assessee purchased certain shares from one 'R' on principal-to-principal basis and resold those shares to the same 'R' without taking physical delivery of the shares and paid only the difference amount of purchase and sale value of shares to 'R'. He claimed deduction of the loss incurred in the said transaction as share business loss. However, the Assessing Officer concluded that the transaction in question could not be treated as genuine. Accordingly, the share business loss was not allowed and the same was added back to the total income of the assessee. On appeal, the Commissioner (Appeals) directed the Assessing Officer to allow the loss so claimed. On the revenue's appeal, though the Tribunal held that there was no cogent material to show that the said share transactions were not genuine, yet, in view of the provisions contained in section 43(5) held that the loss so suffered by the assessee was speculation loss and, hence, not allowable. On appeal : HELD In Hoosen Kasam Dada (India) Ltd. v. CIT [1964] 52 ITR 171 (Cal.), it was held that, under Explanation 2 to section 24 of the Indian Income-tax Act, 1922, a transaction, in which a contract for purchase and sale of any commodity is settled otherwise than by delivery, is a speculative transaction irrespective of whether the parties initially…

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