TMI Blog1973 (7) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... The judgment of the court was delivered by GOVINDA BHAT C.J.-This is a reference at the instance of the assessee made under section 256(1) of the Income-tax Act, 1961, hereinafter called " the Act ". The question of law referred for the opinion of this court is : "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that the loss of Rs. 11,100 was sustained by the assessee in speculative business 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 afte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 43 of the Act has defined the expression " speculative transaction ". It reads thus : " 'Speculative transaction' means a transaction in which a contract for the purchase or 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 : Provided that.... "(omitted as unnecessary) Explanation 2 to section 28 states that " where speculative transactions 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 ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Company Private Ltd. There the court was dealing with Explanation 2 to section 24(1) of the Indian Income-tax Act, 1922, which corresponds to section 43(5) of the Act. This is what Banerjee J. stated: "...In our reading the expression 'contract settled' means 'contract settled before breach'. After breach of contract, the cause of action is no longer based on the contract itself but on its breach. Since the money which the assessee received in the instant case, 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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