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TMI Blog1973 (7) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... within the meaning of Explanation 2 to section 28 read with sub-section (5) of section 43 of the Income-tax Act, 1961 ? " The assessee carried on business in kapas, cotton and other sundry goods. There were purchases and sales of cotton bales and purchase of kapas and sale of cotton after ginning. The assessee returned a gross profit of Rs. 1,75,524 for the assessment year 1967-68. The assessee claimed a deduction of the sum of Rs. 11,100 which was paid as differences to M/s. Patel Volkart Pvt. Ltd. and M/s. Krishna Rajendra Mills Pvt. Ltd., Mysore, in respect of non-delivery of 200 bales of cotton to the former and 100 bales of cotton to the latter under separate contracts entered into with the parties. The Income-tax Officer disallowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actions carried on by an assessee are of such a nature as to constitute a business, the business (hereinafter referred to as 'speculation business') shall be deemed to be distinct and separate from any other business ". As already stated, it is not the case of either side that the assessee in the instant case was carrying on "speculation business" during the assessment year. The case of the department is that the transactions relating to the contract for sale and delivery of 200 bales of cotton to M/s. Patel Volkart Pvt. Ltd., and 100 bales to M/s. Krishna Rajendra Mills Pvt. Ltd., Mysore, were speculative transactions. In order that a transaction may fall within the scope of the expression " speculative transaction " it must be a transacti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase, in our reading of the facts, was the amount of damages suffered by it by reason of breach of the contract, the nature of the transaction was not speculative transaction as defined in Explanation 2. " That view was affirmed by a later Bench decision of the Calcutta High Court in Daulatram Rawatmull v. Commissioner of Income-tax. The learned counsel for the department has not placed before us any decision taking a contrary view. We are in respectful agreement with the view of the law as stated by Banerjee J. in Pioneer Trading Company's case. In order to decide whether the loss claimed by the assessee arose out of speculative transactions, it was incumbent on the the Income-tax Officer and the appellate authorities to decide the questio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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