Law:

Section:

Section 281 of the Income-tax Act, 1961 - Business income - Chargeable as - Whether sale proceeds of loom hours constituted a revenue receipt and not a capital receipt liable to be considered under head "Capital gains" - Held, yes FACTS The Tribunal held that the sale proceeds of loom hours constituted a revenue receipt and not a capital receipt liable to be considered under the head "Capital gains". On reference : HELD In view of decision of the Supreme Court in Empire Jute Co. Ltd. v. CIT [1980] 124 ITR 1, it was to be held that the Tribunal was right in holding that the sale proceeds of loom hours constituted revenue receipt and could not be considered to be capital receipt under the head "Capital gains". Section 28(i), read with section 43(5) of the Income-tax Act, 1961 - Business loss - Allowable as - Assessee, jute manufacturer, in process of carrying on business failed to fulfill some contracts of forward sales by pucca delivery orders (PDO's) and, in order to cover up other profitable contracts, entered into certain speculative contracts - Assessee issued Pucca delivery orders constituting forward sales without actual delivery - Whether transactions in question were speculative in nature, and therefore, loss in such transactions was not allowable as trading loss - Held, yes FACTS The assessee manufactured jute goods and sold these in the market and in the process of its carrying on the business, the assessee had failed to fulfill some contracts of forward sales by PDO's and, in order to cover up other profitable contracts, certain speculative contracts were entered into. In the process of carrying on the business, the assessee had to issue PDO's constituting forward sales in jute goods. There was no actual delivery. The Tribunal held that the transactions in question, were not speculative transactions and therefore loss in such transactions was allowable as business loss. On reference : HELD It was found that after sale of the goods, the assessee was in possession and custody of the goods. The goods were transferred by the transfer of PDO's but there was no actual delivery either of the goods or the actual physical transfer of the goods by handing over…

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