TMI Blog2000 (9) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... mstances of the case, the Tribunal was correct in law in allowing the deductions of Rs. 95,012 and Rs. 43,808 in the computation of the assessee's income from business for the assessment years 1972-73 and 1973-74, respectively ?" The factual position as set out in the statement of case is as follows : For the assessment years 1972-73 and 1973-74, disallowances were made while computing the assessee's income from business in respect of damages paid. The assessee was a sole selling agent for sale of sugar of Ajudhya Sugar Mills, a concern of Lakshmi Ji Sugar Mills Co. P. Ltd. The agency agreement was executed on January 1, 1968. Clauses 5 to 7 of the agreement, which have some relevance for the present dispute, read as follows : "5. Tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee had to honour them and to suffer damages as per clause 7 of the agreement reproduced above. Such damages amounted to Rs. 95,012 and Rs. 43,808 for the two assessment years, respectively. These were claimed as allowable deductions in the respective years. These were also allowed by the Assessing Officer. For the assessment year 1972-73, the assessee went in appeal before the Appellate Assistant Commissioner (in short the "AAC"), on certain other grounds. The said authority examined the above matter and was of the view that the assessee was a regular speculator in the past and the above transactions were speculative transactions within the meaning of section 43(5) of the Act. They constituted a separate and distinct business as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted that the Tribunal was justified in its conclusion. Section 43(5) at the relevant time read : "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 . . . to be a speculative transaction." A transaction cannot be described as a "speculative transaction" within the meaning of section 43(5) of the Act where there is a breach of contract and on a dispute between the parties damages are awarded as compensation, e.g., by an arbitration award. What is really settled by the award of such damages and their acceptance by the aggrieved party is the dispute between the partie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as examined. It was observed that section 43(5) of the Act only covers cases where a contract is settled without breach and not cases where there is a breach followed by settlement of the quantum of damages. A transaction is considered to be speculative if it is settled without actual delivery but it does not follow that all contracts which are settled or adjusted without delivery are speculative. The word "settled" or "settlement" in connection with the contract has not been defined in the Act, or in the Contract Act or the Sale of Goods Act, or in any other statute. The following are the some of the meanings attributed to the word "settled" in the dictionaries : "Determined, deal effectively : dispose of : conclude money or other tran ..... X X X X Extracts X X X X X X X X Extracts X X X X
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