TMI Blog1973 (4) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... e-tax Act, 1922 (to be hereinafter referred to as the Act). For deciding the question of law formulated above, it will be sufficient if we set out the facts in Civil Appeal No. 1037 of 1970. At the hearing we were referred to the facts of that case only. The assessee in Civil Appeal No. 1037 of 1970 is a company dealing, inter alia, in jute and jute goods. In the assessment years 1957-58, 1958-59, and 1960-61 (corresponding accounting periods being calendar years 1956, 1957 and 1959), the assessee claimed Rs. 35,578, Rs. 20,665 and Rs. 3,849 respectively, as losses in its business in the sale and purchase of gunny bags. The Income-tax Officer treated those losses as speculative losses. He held that the contracts in respect of the gunny bags said to have been sold were settled only by delivery of pucca delivery orders (in short P.D.Os.) and not by actual delivery of the goods covered by those documents. He accordingly refused to set off those losses towards the profits made by the assessee in its non-speculative business. The assessee appealed against those assessment orders. The Appellate Assistant Commissioner found that the assessee had purchased the P.D.Os. from various pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad 'profits and gains of business, profession or vocation', any loss sustained in speculative transactions which are in the nature of a business shall not be taken into account except to the extent of the amount of profits and gains, if any, in any other business consisting of speculative transactions. . . " (The second proviso is not relevant for our present purpose). Explanation 1 to that section says: " Where the speculative transactions carried on are of such a nature as to constitute a business, the business shall be deemed to be distinct and separate from any other business." Explanation 2 is important for our present purpose. It says: " A speculative transaction means a transaction 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." The remaining part of that section is not relevant for our present purpose. We have now to see whether, on the facts found by the Tribunal, it can be said that the transactions with which we are concerned can be said to have been "periodically or ultimately settled otherwi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the goods sold are actually delivered. In support of the trade practice pleaded, Mr. Ashok Sen, learned counsel for the appellants, relied on the decision of this court in Duni Chand Rataria v. Bhuwalka Brothers Ltd. Therein Bhagwati J., speaking for the court, quoted with approval the findings of the trial court as to the manner in which the goods in that case were transferred. The learned trial judge observed: " Now visualize the long chain of contracts in which the defendant's contract is one of the connecting links. The defendant buys from its immediate seller and sells to its immediate buyer. As seller it is liable to give and as buyer it is entitled to take delivery. As seller it receives and as buyer it gives shipping instructions. Similar shipping instruction is given by each link until it reaches the mills. The mills deliver the goods alongside the steamer. Such delivery is in implement of the contract between the mills and their immediate buyer. But eo instanti it is also in implement of each of the chain contracts including the contract between the defendant and its immediate buyer and the contract between the defendant and its immediate seller. Not only does ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said to pass until the actual delivery takes place, in view of section 18 of the Sale of Goods Act. Hence, according to him, when the assessee sold the P.D.Os. to their buyers, the property in goods did not pass. In support of that contention, he relied on the decision of this court in Jute and Gunny Brokers Ltd. v. Union of India. That was a case of acquisition of property under rule 75A read with rule 119 of the Defence of India Rules, 1939. Therein, the Government served an order of requisition on the mills which was in possession of the goods sought to be acquired. The validity of that order was challenged by the purchaser of the goods through a P.D.O. He claimed that he was the owner of those goods and as no notice of acquisition had been served on him, the order acquiring the property was invalid. This court upheld the validity of the order of acquisition. It held that as the goods were in the possession of the mills at the time the acquisition order was served, the title in those goods had not passed to the holder of the P.D.O. The rule laid down in that decision has no relevance for deciding the question of law that arises for decision in these cases. Herein, we are conce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the title acquired by the last purchaser went to feed the pevious defective titles obtained by the previous buyers. Consequently, every transfer of the "delivery orders" became a "sale" within the meaning of section 3 of the Madras General Sales Tax Act, 1939. Neither the Income-tax Officer nor the Appellate Assistant Commissioner and nor even the Tribunal has gone into the questions, firstly, as to what was the trade practice at the relevant time and whether the last buyers of the P.D.Os. have taken actual delivery of the goods covered by those P.D.Os. They concentrated their attention solely on the question whether the assessees had given delivery of the goods covered by the P.D.Os. to their transferees. That was not the relevant issue. The crucial question of fact to be decided was whether the last buyers of the P.D.Os. had taken actual delivery of the goods covered by the P.D.Os. Mr. Sen relying on the decision of this court in Duni Chand Rataria's case urged that we should accept the trade practice pleaded by him and straightaway allow the appeals. But, no such trade practice appears to have been put forward before the authorities under the Act. That apart, the transa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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