NIRMAL TRADING COMPANY versus COMMISSIONER OF INCOME TAX, CENTRAL (CALCUTTA)

Citation: [1980] 1 S.C.R. 900 · Decided: 10-10-1979 · Supreme Court of India · Bench: N.L. UNTWALIA · Disposal: Dismissed

Judgment (excerpt)

1/t.. 
'. c 
900 
NIRMAL TRADING COMPANY 
v. 
COMMISSIONER OF INCOME TAX, CENTRAL (CALCUTTA) 
October 10, 1979 
[N. L. UNTWALIA AND R. S. PATifAK, JJJ 
"Speculative transactioni'-Traruactions of sale and purchase settled by harul· 
i1ll over delivery order.J. and payment by chequea-Transacti'ons are 'Speculati'lff 
TraruactJ'on.t'' and attract the provisions of Explanation 2 to section 24(1) of 
lncome·tax Act, 1922. 
The assessee entered into several transactions of sale and purchase with 
different parties, and the transactioas were settled by handing aver delivery 
orders. 
There was no evidence and no plea was taken tbat actual delivery 
of the goods was ever effected either to the assessee or to the subsequent pur· 
chasers from him. 
Dismissing assessee's appeal by certificate under section 66A(2) 
of the 
D 
Income Tax Act 1922, the Court 
E 
HEID : In the absence of any suggestion that actual delivery of goods 
was ultimately effected and in view of the case of the assessee, throughout being 
that banding over of the delivery orders was sufficient as constituting actual 
delivery of the goods, the transactions, in the present case, attracted Explana· 
lion 2 to section 24(1) of the Income-tax Act, 1922. [90! C-E] 
Davenport & Co. (P) Ltd. v. Commissioner of Income-tax, West Bengal II, 
(1975) 100 I.T.R. 715, followed. 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2310 of 1972. 
.)( 
F 
From the Judgment and Order dated 11-12-1970 of the Calcutta 
High Court in Income Tax Ref. No. 101/62. 
P. V. Kapoor, Anil Sachthey, 
Miss Bina Gupta and 
Praveen 
Kumar for the Appellant. 
T. A· Ramachandran and Miss A. Subhashini for the Respondent. 
The Judgment of the Court was delivered by 
G 
PATHAK, J.-This appeal by certificate under section 66A (2) of 
the Indian Income Tax Act, 1922 relates to the application of Ex-
planation 2 to s. 24( 1) of the Indian Income Tax Act. 
The assessee deals in paper, hessian and B. Twill. 
After assess-
ment by the Income Tax Officer for the assessment year 1955-56, and 
H 
thereafter an appeal disposed of by the Appellate Assistant Commis-
sioner, the Income Tax Appellate Tribunal in secood appeal found 
that certain transactions entered into by the assessee could not be 
j 
j 
.. 
NIRMAL TRADING CO. V. C.I.T. (Pathak, J.) 
911 
described as "speculative transactions" within the meaning of Explana-
tion 2 to s. 24 ( 1) of the Indian Income Tax Act, 1922 and allowing 
the appeal it directed that the loss suffered by the assessee should be 
set-off under s. 24 ( 1) of the Act. At the instance of the Revenue, 
the Appellate Tribunal referred the following question to the High 
Court at Calcutta for its opinion :-
"Whether, on the facts and in the circumstances of the 
case, the loss of Rs. 1,03,688/- was the result of speculative 
transactions within the meaning of Expi:µlation 2 to section 
24(1) of the Indian Income Tax Act, 1922, and therefore, 
was not allowable to be set off under section 24(1) of the 
said Act ?" 
The High Court has answered the question in favour of the Revenue. 
It appears the assessee entered. into several transactions of sale 
and purchase with different parties, and the transactions were settled 
by handing over delivery orders. 
There is no evid,ence that actual 
delivery of the goods was ever effected either to the assessee or to 
subsequent purchasers from him. All that passed were the delivery 
orders and payment by cheque. The High Court has taken the view 
that in the absence of actual delivery the transactiolls attracted Ex-
planation 2 to s. 24(1) and must be regarded as "speculative transac-
tions." It seems to us that the High Court is right having regard to 
the law laid down by this Court in Davenport & Co. P. Ltd. v. Com-
missioner of Income-Tax, West Bengal II('). It is urged on behalf 
of the assessee that the case falls under Raghunath Prasad Poddar T. 
Commissioner of Income-Tax Calcutta.(') 
But that decision has been 
overruled by this Court in Davenport & Co. P. Ltd. (supra), and in 
any event no question of invoking that decision arises because in the 
present case there has never been any suggestion that actual delivery 
of goods was ultimately effected. The case of the assessee throughout 
has been that handing over of the delivery orders was sufficient as 
constituting actual delivery of the goods. 
In the' result, the appeal fails and is dismissed with costs. 
S.R. 
(t) [1975) JOO I.T.R. 715. 
(2) [1973] 90 I.T.R. 146. 
Appeal dism

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