Law:

Section:

Section 24(1), read with explanation 2, of the indian income-tax act, 1922 [corresponding to section 73 of the Income-tax Act, 1961]-Speculative transactions-Assessee company suffered loss in some transactions settled by handing over only delivery orders without actual physical delivery of goods-Whether loss was result of speculative transactions within the meaning of explanation 2 to section 24(1) and not eligible for set off-Held, yes Facts The assessee-company deals in paper, hessian, etc. For the assessment year 1955-56, it entered into several transactions of sale and purchase with different parties, which were settled by handing over only delivery orders, entailing payments by cheque, without actual physical delivery of goods at any stage. The Tribunal found that the said transactions, resulting in a loss of Rs. 1,03,688, could not be described as "speculative transactions" within the meaning of Explanation 2 to section 24(1) and, accordingly, directed that the said loss should be set off under section 24(1). On reference, the High Court reversed the Tribunal's decision, holding that, in the absence of actual delivery, the transactions attracted the said Explanation 2 to section 24(1) and must be regarded as "speculative transactions". On appeal: Held The High Court was right in law in its view that the impugned loss was not allowable to be set off under section 24(1) . Case review Decision of the Calcutta High Court affirmed. Davenport & Co. Pvt. Ltd. v. CIT [1975] 100 ITR 715 (SC) followed. Cases Refereed to Davenport & Co. Pvt. Ltd. v. CIT [1975] 100 ITR 715 (SC) and Raghunath Prasad Poddar v. CIT [1973]90 ITR 140 (SC). JUDGMENT Pathak, J. 1. This appeal by certificate under section 66A(2) of the Indian Income-tax Act, 1922 relates to the application of Explanation 2 to section 24(1) of the Indian Income-tax, 1922. 2. The assessee deals in paper, hessian and B. Twill. After assessment by the ITO for the assessment year 1955-56, and thereafter an appeal disposed of by the AAC, the ITAT in second appeal found that certain transactions entered into by the assessee could not be described as "speculative transactions" within the meaning of…

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