Law: Income Tax Act, 1922

Section: 24(1)

Section 73 of the Income-tax Act, 1961 [Corresponding to section 24(1) of the Indian Income-tax Act, 1922] - Losses - In speculation business - Assessment year 1956-57 - Whether words "ultimately settled otherwise than by actual delivery or transfer of commodity" can only mean, by implication, that even if at outset parties intended performance or to claim difference in price, if ultimately contract is settled otherwise than by actual delivery or transfer of commodity, it is a speculative transaction - Held, yes - Whether where assessee incurred a loss in respect of Contracts in nature of teji mandi contracts prohibited by section 19 of Forward Contracts (Regulation) Act, 1952, forward contracts were speculative transactions which were in nature of a business and loss incurred in such transaction could only be allowed to be set off only against profits in speculative transactions and not against income from other business - Held, yes Interpretation of status - Rule of statutory constructions FACTS The assessee firm was carrying on the business in turmeric. For the assessment year 1956-57, it claimed set off of loss incurred in a business of speculation. The loss incurred was in the nature of teji-mandi contracts prohibited by section 19 of the Forward Contracts (Regulation) Act, 1952 and was disallowed by the department on the ground of its being an illegal loss. The department as well as the Tribunal rejected the assessee's contentions, and held that the two transactions were speculative transactions, and the loss resulting therefrom could not be treated as a trading loss in computing the profits or gains of any business, profession or vocation carried on by him under section 10(1) of the Act. They also held that the transactions did not amount to hedging transactions protected by clause (a) of the proviso to Explanation 2 to section 24(1). On reference : HELD The Explanation 2 to section 24(1) speaks of a periodical settlement of the differences in price otherwise than by actual delivery or transfer, but it also speaks of the ultimate settlement of the contract otherwise than by actual delivery or transfer of the goods. The words 'ultimately settled otherwise…

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