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Section 28(i) of the I ncome-tax Act, 1961-Business loss-Assessee-company, dealing in sugar business, subscribed to government securities at instance of government-Subsequently it sold securities before they became ripe for payment-no evidence to show that assessee was dealer in securities or there was compelling necessity to sell securities before maturity - no nexus established between loss and business carried on by assessee-W hether loss arising out of sale of securities was a trading loss-Held, on facts, no Facts The assessee-company, dealing in sugar business, subscribed to the UP State Development Loan, 1974, to the extent of Rs. 6,50,000 at the instance of the Government. Subsequently, the assessee sold the securities before their maturity at a loss of Rs. 29,347 and claimed deduction of the said amount as a trading loss. The ITO, however, rejected the claim holding (i) that the said loss was of a capital nature since the assessee did not deal in Government securities; and (ii) that the securities had been purchased by way of investment. On appeal, both the AAC and the Tribunal upheld the ITO's order. On reference under section 256(2): Held There was no evidence to show that there was any compelling necessity whatsover for selling the Government securities before their maturity. That apart, the assessee could not establish any nexus between the loss suffered and the business carried on by it. Hence, the loss suffered on the sale of the Government securities was not a trading loss and the assessee was not entitled to the deduction of Rs. 29,347. Case review Addl. CIT v. B.M.S. (P.) Ltd. [1979] 119 ITR 321 (Mad.) distinguished. Case referred to Addl. CIT v. B.M.S. (P.) Ltd. [1979] 119 ITR 321 (Mad.) JUDGMENT Rastogi J.-M/s. Sir Shadilal Sugar and General Mills Ltd., Mansurpur, Muzaffarnagar (hereinafter referred to as "assessee-company"), in its assessment to income-tax for the assessment year 1964-65, the previous year ended on September 30, 1963, claimed deduction of a sum of Rs. 29,347 as loss incurred in transactions in Govt. securities. The ITO, on the view that the assessee-company does not deal in Govt. securities, held that the securities had been…

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