TMI Blog1969 (7) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... porting groundnut oil. The assessee had regular transactions with Messrs. N. Schrok, N. V. Rotterdam. During the relevant year the assessee fulfilled several contracts with the Rotterdam party by making deliveries of the goods contracted for. On November 4, 1953, the assessee entered into a contract with the party at Rotterdam for delivery of 200 tons (of 2,240 lbs. each ) of Indian crude groundnut oil for January and/or February, 1954, shipment at pound 125 per ton. But the assessee could not secure the export licence for shipping the goods. On the date of the contract the Government of India had not announced its export policy but during the first half of the year exports were normally permitted. The Tribunal observed that the assessee mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sum of Rs. 44,226 was rightly treated as a loss in speculation. The following question has, in the circumstances, been referred to this court : " Whether, on the facts and in the circumstances of the case, the sum of Rs. 44,226 was a loss in speculation within the meaning of Explanation 2 to section 24(1) or an allowable expenditure under section 10(1) or section 10(2)(xv) of the Indian Income-tax Act, 1922 ?" Let us, at the outset, set out the relevant provisions of section 24. They are as follows: " 24. Set-off loss in computing aggregate income.-(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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll forthwith be closed at a price to be fixed by the price fixing committee appointed by the London Oil and Tallow Traders' Association. The difference between the contract price and the price so fixed shall be the amount payable or receivable under this contract. The parties shall be bound to furnish to the price committee such information and produce to the committee such books, papers and documents as are incidental to the default. In default of fulfilment of contract by either party the other party at his discretion shall after giving notice in writing have the right to sell or purchase as the case may be against the defaulter who shall make good the loss if any on such sale or purchase on demand. If the party liable to pay shall be d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (is) to be void..."g Mr. B. L. Pal, learned counsel for the revenue, has urged before us that each reported case on the subject deals with the construction of the relevant contract. The contract in the present case, according to Mr. Pal, was in the standard form prescribed by a well-known trade association in London. In that form, for the convenience of the contracting parties, the association made ample provision for what was to happen in the case of difficulties arising in the performance of the contract. That is why, says Mr. Pal, the association made a distinction between "default" and breach of contract. Clause 10 is the "default" clause ; but the present case can be squarely brought within clause 15(b) which does not involve any "d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, the receipt was not a receipt from a speculative transaction as defined in Explanation 2 : and the money so received was not liable to be set off against speculation loss of earlier years. In the light of the principles decided in this case we find in the present reference that the arbitrators were appointed in terms of the contract between the parties on the basis that the assessee committed default in fulfilment or performance of the contract ; the arbitrators made an award ; there was an appeal against the award ; but the award was confirmed and the assessee had to pay the damages which the arbitrators had determined. It also appears that there was no challenge to these facts before the fact finding authorities below. This is, ther ..... X X X X Extracts X X X X X X X X Extracts X X X X
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