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Section 28(i) of the Income-tax Act, 1961 - Business deduction/loss - Assessment years 1968-69 and 1969-70 - Assessee-firm was carrying on business of manufacture and sale of sugar - Though it was not dealing in Government securities, it was obliged to purchase them with a view to satisfy Government officials with whom it had to deal every day in connection with its business - Whether assessee was entitled to set off loss incurred on sale of Government securities - Held, yes FACTS The assessee-firm was carrying on the business of manufacture and sale of crystal sugar. For the assessment years 1968-69 and 1969-70, the assessee claimed set off of loss incurred on sale of securities. The assessee submitted that though it was not dealing in the Government securities, it was obliged to purchase them with a view to satisfying the Government officials with whom they had to deal every day in connection with their business. The ITO rejected the assessee's claim. However, on appeal, the AAC allowed the assessee's claim. On appeal by the revenue, the Tribunal upheld the order of the AAC. On reference: HELD Following the decision of the Supreme Court in the case of Patnaik & Co. Ltd. v. CIT [1986] 161 ITR 365 /27 Taxman 287 in the instant case, the Tribunal was justified in holding that the assessee was entitled to set off of loss incurred on the sale of securities held by it. CASE REFERRED TO Patnaik & Co. Ltd. v. CIT [1986] 161 ITR 365 / 27 Taxman 287 (SC). EDITOR'S NOTE The High Court also held that since partial partition in the assessee-HUF was accepted by the Tribunal in its order for the assessment year 1961-62, there was no question of not accepting the same partial partition for the assessment year 1968-69. ORDER Reddy, CJ.-Under section 256(2) of Income-tax Act, 1961 ('the Act') the Tribunal has referred the following questions for the assessment year 1969-70: "1. Whether, on the facts and in the circumstances of the case, was the Tribunal right in allowing the full amount of loss or any part thereof on the sale of securities by the assessee? 2. Whether, on the facts and in the circumstances of the case, was the Tribunal justified in treating the loss of…

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