Law: Income Tax Act, 1922

Section: 24

[Indian Income Tax Act, 1922 (XI of 1922)].....Section 24(1), Expl. 2- Loss-Speculative lass-Contract for purchase and sale of jute and hessian settled by delivery of pucca delivery order instead of 'actual' delivery-Transactions, whether speculative-Held yes-Loss sustained in the transactions-Whether speculative loss-Held yes-Words "Actual delivery "Settled", meaning of. JUDGMENT SANKAR PRASAD MITRA, J.-This is a reference under Section 66(1) of the Indian Income Tax Act, 1922. The assessment year is 1959-60. The corresponding accounting year was the year ended on the 31st May 1958. The assessee is Messrs Budge Investment Co. Ltd., Which, inter alia, deals in jute and hessian. In the course of its dealings in, jute and hessian during the relevant accounting year the assessee sustained a loss of Rs.75,609. The Income Tax Officer refused to treat this loss as a business loss. He found that in no case delivery of the goods was given or taken. He, therefore, treated the loss as a speculative loss. Before the Appellate Assistant Commissioner it was contended on behalf of the assessee that contracts for each transaction of purchase' and sale were in the form prescribed by the Indian Jute Mills Association and these contracts were settled in each case by giving and taking delivery of pucca delivery orders. The Appellate Assistant Commissioner held that, as in each case delivery was given and taken by exchange of pucca delivery orders though the entire amount of purchases and sales were paid and received in full in cash, in the absence of actual delivery of the goods, the contracts were speculative contracts and dismissed the appeal. The Tribunal followed the decision of this Court in D.M. Wadhwana v. Commissioner of Income Tax [(1966) 61 I.T.R. 154.] and dismissed the appeal. The following question of law has been referred to this court for its opinion: "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that the loss of Rs. 75, 609 suffered by the transfer or delivery of pucca delivery orders was speculation loss under the second Explanation to the proviso to Section 24(1) of the Indian Income Tax Act, 1922?"…

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