LexJUTE INVESTMENT CO. LTD. versus COMMISSIONER OF INCOME TAX, WEST BENGAL, CALCUTTA
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A B c D E 902 JUTE INVESTMENT CO. LTD. v. COMMISSIONER OF INCOME TAX, WEST BENGAL, CALCUTTA . October 10, 1979 [N. L. UNTWALIA AND R. S. PATHAK, JJ.] Indian Income Tax Act 1922, S. 24(1), Explanation 2-Transactions of pur~ "">r-~· chase. and sale between the same parties by mere transfer of delivery orders without physical delivery of goods-Transactions if speculative. The assessee carried on business in purchase and sale of gunnies. By four different contracts it purchased gunny bags from one party and sold them to the same party by four different contracts, all of which resulted.in a loss of Rs. 2.75 lakhs. The contracts were transferable specific delivery contracts falling within the scope of the bye-laws of the East India Jute & Hessain Exchange Limited which were approved by the Forward Market Commission. In these transactions there was_ no physical delivery of goods and there was a transfer of delivery orders only. Before the Income Tax Officer, the assessee claimed the loss as an ordinary business loss on the ground that the 1ransactions were entered .into in the ordinary course of business. The Income Tax Officer rejected the claim and held that tho transactions in which delivery were handed over without physical delivery of the goods were "speculative transactions" within the meaning of Explanation 2 to S. 24(1) -Of the Indian Jacome Tax Act. The Appellate Assistant Commissioner held in favour of the assessee and his order was upheld by the Income Tax Appellate Tribunal. The High Court however answered the reference by the Tnbunal in favour of the Revenue and against the assessee. · F Dismissing the appeal this Court, G B HEID ; 1. The High Court was right in answering the question i11 favour of the Revenue. [905 G] 2. Explanation 2 to S. 24(1) defines a speculative transaction as ''a transac> tion in which a contract for purchase and sale of any commodity including stocks and shares is periodically or ultimately settled otherwise than by the actual delivery or transfer of the commodity or scrips .. " What is contemplated by the explanation is a real or factual delivery or transfer of the commcxlity and not a notional delivery or transfer. [905 AJ 3. Over-ruling its earlier view in Raghunath Prasad Poddar v. Co1nn1issioner of Income Tax, Calcutta, (1973) 90 I.T.R. 140, this Court in Da>enport & Co. (P) Dtd. v. Commissioner of Income Tax, West Bengal ll, (1975) 100 J.T.R. 715, upheld the view of the Calcutta High Court that 'unless the transactioo was settled by delivery or transfer of the commodity it would be a speculative transaction by reason of Explanation 2 to S. 24(1)'. · [905 B-E] / • • '-< JUTE INVESTMENT co. v. C.l.T. (Pathak, J.) 903 In the instant case, the seller and the buyer of the gunny bags \·vas the same. A There was no actual delivery or transfer of the gunny bags, but the contracts were settled between the parties by transfer of pucca delivery orders only. [905F] Wadhwana (D. N.) v. Commissioner of Income Tax, W.B. (1966) 61 I.T.R. 154, Budg.~ Budge Investment Co., Ltd. v. Co1nmissioner of Income Tax, West Bengal I Calcutia, (1969) 73 I.T.R. 772, Nana/al M. Sanna & Co. (1') Ltd. v. B Commissioner of Income Tax, West Bengal-II, (1969) 73 I.T.R. 713 and Murli- dluir Jhunjhunwala v. Con1missioner of Income Tax~ West Bengal-II, (1969) 73 J.T.R. 727; approved. CIVIL AFPELLATE JURISDICTION : Civil Appeal No. 2259 of 1972. From the Judgmeut and Order dated 6-1-1971 of the Calcutta High Court in I.T.R. No. 86/671. P. V. Kapoor, Anil Sachthey, Miss Bina Gupta and Praveen Kumar for the Appellant. P. A. Francis and Miss Subhashini for the Respondent. c The Judgment of the Court was delivered by D PATHAK, J.-This appeal by certificate under s. 66A(2) of the Indian Income Tax Act, 1922 raises the question whether the trans- actions in which the assessee was engaged were "speculative transac- tions" as defined by Explanation 2 to section 24(1) of that Act. The arnessee carries on business in gunnies. The total purchases disclosed by the assessee for the year ended June 30, 1960 amounted to Rs. 1,01,51,225 and the total sales during that year were shown at Rs. 1,03,27,208. The purchases a'nd sales included certain transactions with M~ssrs Kesardeo Shyamsunder. Under . contract Nos. 96 dated November 11, 1959, 108 dated November 12, 1959, 643 dated April 27, 1960 and 836 dated May 25, 1960, the assessee clai
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