TMI Blog1968 (4) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... g to, or held by, or managed on behalf of, Messrs. Haji Habib Pirmohammed, 25, Amratolla Street, Calcutta-1, shall vest in the Custodian of Enemy Property for India." The other notification is couched in the following language : "No. 12/39/65-E. Pty.--In exercise of the powers conferred by subrule (1) of rule 133-V of the Defence of India Rules, 1962, the Central Government is pleased to order that all property in India, movable and immovable, belonging to, or held by, or managed on behalf of, Mr. Haji Habib Haji Pirmohammed (other than his share in the partnership known as Messrs. Haji Habib Haji Pirmohammed), 25, Amratolla Street, Calcutta-1 shall vest in the Custodian of Enemy Property for India." Mr.T. K. Basu, learned counsel for the assessee, submitted that the Custodian of Enemy Property was seeking to be brought on the record of this reference case. No application has been made by the Custodian of Enemy Property for being brought on the record and we do not think that he must be brought on the record for the purposes of answering the reference. The provisions contained in Order 22 of the Civil Procedure Code are not applicable to references made to the High Court u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner. The Appellate Assistant Commissioner took notice of the admission by the assessee that the losses in oil and gunny were on account of transactions in which no actual delivery was made or taken in respect of the commodity concerned and the contracts were settled by payment of differences. The Appellate Assistant Commissioner held that, in the circumstances of the case, Explanation 2 to section 24(1) would be applicable and the transactions should be regarded as speculative transactions as defined in the said Explanation. The Appellate Assistant Commissioner, therefore, held that the Income-tax Officer was justified in disallowing the losses claimed in the oil and gunny transactions and dismissed the appeal. Thereupon, the assessee took a second appeal before the Appellate Tribunal. Before the Tribunal it was contended, on behalf of the assessee, that the assessee had in fact intended to give and take actual delivery of the goods contracted for but could not do so on account of adverse trading conditions and was obliged to settle some of the said contracts by payment of differences. Dealing with this contention of the assessee, the Tribunal observed that there was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re this court : "(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the losses of Rs. 9,26,402 and Rs. 35,000 were sustained in speculative transactions which are in the nature of a business? 2. Whether the Income-tax Appellate Tribunal, a body constituted under the Indian Income-tax Act, 1922, was competent to go into the question as to whether the first proviso to section 24(1) of the Indian Income-tax Act, 1922, was ultra vires the powers of the legislature?" The second question was not pressed before this court and we need not answer the question. In order to answer the first question it is necessary for us to remind ourselves of the language of section 24 of the Indian Income-tax Act : "24. (1) Where any assessee sustains a loss of profits or gains in any year under any of the heads mentioned in section 6, he shall be entitled to have the amount of the loss set off against his income, profits or gains under any other head in that year : Provided that in computing the profits and gains chargeable under the head 'Profits and gains of business, profession or vocation', any loss sustained in speculative transactions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... present case, the facts are otherwise. In other words, in a series of transactions in gunnies, some transactions were non-speculative and others were speculative. Under such circumstances, the proviso does not apply. I must admit that I am unable to understand the logic of this argument. Perhaps, it is putting forward the views of Messrs. Kanga and Palkhivala in another form. I must point out that if that was so, the introduction of Explanation 1 would have been utterly superfluous. Explanation 1 says that where 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. In considering the proviso, we are considering the profits and gains of a business. Other headings do not enter into the picture. But the proviso does not contemplate that the speculative transactions should form a separate unit. On the other hand, it has been stated in Explanation 1 that they would be 'deemed' to be a distinct and separate unit. I cannot see any difficulty in separating the two kinds of business, viz., speculative and non-speculative, and considering them as separate group. I might here poi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ymbolical delivery of goods divesting the seller's possession and lien may be sufficient compliance with the Sale of Goods Act. In enacting the Explanation 2 of section 24(1) of the Income-tax Act, the legislature did not intend to affect any transaction of sale wherein the goods were not physically delivered by the seller to the buyer but only laid down that if there was no actual or physical delivery, the loss, if any, would be a loss in a speculative transaction which could be allowed to be set off only against a profit in a transaction of the same nature." The view expressed by the Patna High Court in Sahu Jain Ltd. v. Commissioner of Income-tax is not different from the view expressed by this court. On the above authorities, we have to overrule the argument that since the assessee did not intend, at the inception, to carry on speculation in oil and gunny in respect of the transactions which were ultimately settled by payment of difference, he should not be brought within the mischief of section 24. There is no place of intention in the scheme of section 24 as has been held in the decisions quoted above and with which we are in respectful agreement. The other argument adva ..... X X X X Extracts X X X X X X X X Extracts X X X X
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