TMI Blog1993 (8) TMI 119X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 24,53,343 resulting in a net loss of Rs. 40,87,235. The Gawar was stated to have been purchased from five commission agents, namely, V.C. Jain Sons, Motilal Co., Mahavir Traders, Arhant Dev Trading Co. and Parasnath Trading Co. 3. The Assessing Officer rejected the claim of the assessee in respect of the loss claimed in respect of purchase and sale of foodgrains on the following grounds : 1. In all the cases the parties who have claimed to have purchased and sold goods on behalf of the assessee-company do not have any evidence of physical purchase and sale of goods in the form of octroi, transport receipt and there are only book entries. 2. In two cases i.e. Arihant Dev Trading Co. and Mahavir Traders even the books of account i.e. cash book, ledger, stock register could not be produced by the said parties and therefore, genuineness of transactions with these parties remains unproved. In the case of other three parties though the books of account were produced there is no evidence of physical delivery either at the time of purchase or at the time of sale on behalf of assessee-company and to that extent the genuineness of transactions remains unproved. 3. In cases w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ading and unloading expenses, commission and interest. Since assessee did not have sufficient space for storing the goods, the agents were asked to provide storage facility for which they have been compensated. The commission agents have confirmed having taken actual delivery of the goods and also having given the delivery at the time of sale of goods. He accordingly pleaded that the revenue was not justified in treating the transaction as of speculative nature. He strongly relied upon the decision of the Tribunal in the case of Pannalal Hukam Chand v. ITO [IT Appeal No. 528 (Delhi) of 1987, dated 17-11-1991] assessment year 1983-84, where it has been held that taking of delivery and giving delivery of goods by agent for and on behalf of principal would amount to delivery by the assessee and if any loss is suffered in the transaction the same is allowable as a business loss. Reference was also made to the statement recorded by the Assessing Officer of the three agents being the representatives of V.C. Jain Sons, Mahavir Traders and Arihant Dev Traders Co. The statements in the case of Parasnath Trading Co. and Motilal Co. had not been recorded by the Assessing Officer. The lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trade usage by cheque would not be sufficient to exclude the transaction from the definition of speculative transactions. 9. The learned D.R. pointed out that this is the only year in which assessee has dealt in Gawar. Assessee had neither any experience in the past to deal in this commodity nor has it dealt in any subsequent year. Referring to the decision of the Tribunal relied upon by the learned counsel for the assessee, learned D. R. contended that firstly the decisions of the Supreme Court have not been considered by the Tribunal. Secondly in this case, there is no evidence to establish that assessee has taken physical delivery of goods even through agents, and as such the decision is inapplicable to the facts of this case. Similarly the decision of the Allahabad High Court is stated to be inapplicable to the facts of this case. It was accordingly pleaded that the decision of the revenue that the transaction in any case was a speculative transaction may be upheld. 10. We have given our careful consideration to the rival contentions. As pointed out earlier, there is no information with us as to whether any appeal has been filed by the revenue against the decision of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar 1308.2 qts. for a sum of Rs. 12,51,726.14. For the second period assessee claims to have purchased Gawar 7645.60 qts. for a sum of Rs. 52,88,852.84. This Gawar weighing 8904.80 qts. is claimed to have been sold for a sum of Rs. 24,53,343.16 as a result of which a loss amounting to Rs. 40.87,235 is claimed to have been incurred. It is not disputed that assessee did not pay any amount for the purchase of goods nor did it receive any proceeds of the sales. Assessee has made entries in its books of account on the basis of bills issued by five parties, namely, V.C. Jain Sons, Motilal Co., Mahavir Traders, Arihant Dev TradingCo. and Parasnath TradingCo.In other words, assessee did not pay a single penny for the purchase of grains to the tune of Rs. 65,40,578. The sale of goods is also sought to be supported by the assessee on the basis of bills issued by the aforementioned five parties. When assessee was confronted by the Assessing Officer to establish the loss, assessee furnished a reply dated26-11-1990which has been reproduced by the CIT(A) in his appellate order. We consider it worthwhile to reproduce the reply for the sake of facility : " 1. We have been informed by the comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce amount and if there is a loss then difference amount is being paid to them including cost of the goods, interest, godown rent, loading and unloading charges or other incidental charges are as per market condition." From the reply filed by the assessee and the contentions before the first appellate authority as well as before us it is evident that assessee is not disputing the following facts : (a) No physical delivery was taken by the assessee from the five commission agents. (b) Physical delivery of goods to the sellers was also not given by the assessee. (c) No payment was made for the purchase of goods by the assessee. (d) Assessee did not receive any sale consideration on account of sale of goods from the commission agents. (e) Assessee has settled the accounts with the five commission agents by paying the difference between the purchase and sale price of grains. 12. The only claim of the assessee that requires consideration is (a) that the five parties have acted its agents for the purchase and sale of Gawar and have taken actual delivery of goods on behalf of the assessee, (b) that the goods had been kept in the godowns of the agents for which they have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alf of the assessee. In the case of Mahabir Traders, loss suffered is Rs. 8.22,185 and in the case of Arihant Dev Trading Co., the loss claimed is Rs. 9,79,172. These two parties have failed to produce any books of account or any material to support the claim of the assessee that physical delivery of goods had been taken or given at the time of purchase and sale. 14. In the case of Davenport Co. (P.) Ltd. their Lordships of the Supreme Court have held that whether a transaction is speculative in the general sense or under the Contract Act is not relevant for the purpose of Explanation 2 to section 24(1) [corresponding provision section 43(5)]. The definition of " delivery " under section 2(2) of the Sales of Goods Act which includes both actual and constructive or symbolic delivery has no bearing on the definition of speculative transaction in the nature. According to their Lordships the words ' actual delivery ' in Explanation to section 24 means real as opposed to notional delivery. 15. In the case of Jute Investment Co. their Lordships of the Supreme Court have held on that for the purposes of Explanation 2 to section 24(1) of the Indian Income-tax Act, 1922 [corresponding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he bills of five commission agents and their confirmations. The claim of the assessee that the five parties had acted as agents and that the actual delivery of goods had been taken by them on its behalf is an assertion without supporting material and in our view after-thought. A perusal of the bills issued by five agents reveals that datewise quantity and rate of Gawar, amount etc. has been indicated. Besides commission and labour charges are also added in the bills issued. The sale bills have also been issued by these five parties. Apart from giving weight, rate and amount, some charges on account of cartage, labour, brokerage, godown rent, interest etc. has also been debited in the bills issued by the commission agents. 18. It is interesting to note that assessee in its books of account have reflected the sale of Gawar on the basis of bills issued by the five parties on their letter heads. As against the gross amount mentioned in these bills the net amount of proceeds has been reflected as sales. The details of sale proceeds in respect of the five parties as indicated in the bills issued and as recorded by the assessee are as under : Gross Amount Net Amount Rs. Rs. 1. M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... symbolic delivery of goods even if it were established is of no consequence in view of the decisions of the Hon'ble Supreme Court referred to elsewhere in this order. The decision of the Tribunal in the case of Pannalal Hukum Chand is inapplicable to the facts of this case for two independent reasons. Firstly, the claim of the assessee that the five parties referred to elswhere in this order have acted merely as agents of the assessee and had taken the delivery at the time of each purchase and also given delivery at the time of each sale, has not been corroborated. Secondly, the two decisions of the Hon'ble Supreme Court in the cases of Jute Investment Co. and Davenport Co. (P.) Ltd. do not seem to have been brought to the notice of the Hon'ble Bench. The decision of the Allahabad High Court in the case of Prahlad Rai Murali Lal is also inapplicable to the facts of this case. The observation regarding non-delivery of wagons in that case is to be read in the context in which the same has been made. We are fortified in our view by the decision of Supreme Court in the case of CIT v. Sun Engg. Works (P.) Ltd. [1992] 198 ITR 297. 19A. Considering the facts and circumstances of this ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
