TMI Blog1986 (4) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... Assistant Commissioner holding that the amount of compensation of Rs. 31,500 was paid by the assessee towards the breach of contract and that the same is allowable as trading loss ? (2) Whether, on the facts and in the circumstances of the case, the amount of compensation paid by the assessee for the breach of contract, without undertaking any business activity, can be allowed as business loss? " The assessee-firm entered into a contract for the supply of wool to M/s. S. A. Paul and Co., Belgium. There were three contracts. Contract No. 3099 was for supply of 100 bales; contract No. 3101 was for 200 bales and contract No. 3102 was for supply of 100 bales. The aforesaid three contracts were confirmed by the buyer-firm, vide its letters d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct and further the payment has been made in the interest of business..." The Revenue went in appeal and the Tribunal dismissed the same by its order dated September 2, 1979. In coming to this conclusion, it relied on Daulatram Rawatmull v. CIT [1970] 78 ITR 503 (Cal) and distinguished Davenport Co. P. Ltd. v. CIT [1975] 100 ITR 715 (SC). An application under section 254(2) of the Income-tax Act, 1961 (No. XLIII of 1961) (hereinafter referred to as " the Act "), was filed by the Income-tax Officer, B-Ward, Bikaner. By order dated September 12, 1979, the application was rejected. On an application being made under section 256(1) of the Act, the Tribunal has referred the aforesaid two questions for the opinion of this court. It may be stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therein, we are of the opinion that the Tribunal was justified in confirming the order dated October 10, 1978, of the Appellate Assistant Commissioner holding that the amount of compensation of Rs. 31,500 was paid by the assessee towards the breach of contract and that the same is allowable as a trading loss under section 37(1) of the Act. Question No. (2): Question No. (2) is more or less overlapping with question No. (1). The Tribunal has sought the opinion of this court on the question whether the amount of compensation which was paid by the assessee for the breach of contract without undertaking any business activity can be business loss. We have already held on the basis of the decision in Rajasthan Wool Agencies' case [1986] 160 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rved that he was bound by the decision of the Division Bench of the Tribunal. In the statement of the case, in para. 7, as stated above, reference to ITO v. Rajasthan Wood Agencies' case [1986] 160 ITR 358 (Raj) has been made. However, in question No. (2), which has been referred by the Tribunal for the opinion of this court, reference to section 43(5) of the Act, has not been made. Even this question does not incorporate the conditions necessary for the applicability of section 43(5) of the Act. Learned counsel for the Revenue, on the basis of the contentions raised by learned counsel for the assessee before the Tribunal, as is evident from para. 4 and para. 7 of the order of the Tribunal, submitted that the applicability or non-applicabil ..... X X X X Extracts X X X X X X X X Extracts X X X X
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