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2014 (1) TMI 1091 - HC - Income TaxWhether loss on transaction of shares is speculative loss - Held that:- Decision in Commissioner of Income Tax Vs. Subhash Chand Shorewala [2004 (1) TMI 327 - ITAT DELHI-F] followed - On some occasions, the loss on the share transaction was consequent to a breach of contract by the client and the same could not be said to be speculative loss - Secondly, in certain situations, a broker also acts as a jobber and the jobbing transactions are inherent in the business of share broking and the same is also not to be viewed as a speculative loss. The two facets of the issue relate to: (a) loss as a result of the breach of contract by the clients; and (b) loss suffered on account of jobbing transaction - As regards the loss on account of breach of contract - Following Bhagwan Dass Rameshwar Dayal [1984 (5) TMI 35 - DELHI High Court] - One can visualise a number of situations in which there may be no delivery for various reasons, i.e., because of failure of the party on account of insolvency or frustration, e.g., banning of business or mere breach, i.e., to say non-supply - All these cannot be classified as speculative within the meaning of section 43(5) - A contract which is settled by means of a cross contract is termed as speculative transaction - If the contract is settled for some other reasons by payment of damages or even without payment of damages it may or may not be speculation transaction depending upon the circumstances of the case - If a contract is broken, i.e., for any reasons one party is unable to give delivery order the other party is unable to take delivery, it is a case of breach of contract - The loss suffered by the appellant on account of breach of contract falls outside the purview of speculative transaction. The share trading business on behalf of oneself is known as jobbing - Section 43(5) defines the word speculative transaction, but there are three exceptions to it - The assessed, being in the business of broking, would be facing situations wherein some of the clients do not own up the transactions on anticipating losses - In such situations, the consequential loss incurred by the assessee to honour the commitments is to be viewed as an integral part of carrying on of assessee's business and is, therefore, not liable to be judged as a speculation loss - The share trading business on behalf of oneself is known as jobbing - A transaction carried on by the assessee for sale and purchase of the shares was fully covered by the term 'jobbing' and assessee is entitled for the extension of the benefit of proviso (c) to Section 43(5) of the Act - Decided in favour of assessee.
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