TMI Blog1984 (7) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion 'Speculative transaction' in section 43(5) of the Income-tax Act, 1961 ?" For the assessment year 1970-71, the assessee, who is a merchant in groundnut, kapas, cotton and cotton-seeds claimed a deduction of Rs. 35,150 paid to M/s. B. S. Munavalli of Gokak for non-delivery of certain quantities of cotton under the agreement dated February 5, 1969. As per the terms of the agreements, delivery of the cotton was required to be effected and repeated demands by the buyers were also unheeded by the assessee. On May 23, 1969, sum of Rs. 35,000 was paid by the assessee as per the decision of panchas. The assessee claimed deduction of that amount stating that there was a breach of the contract resulting in the payment of damages therefor. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pur and met you today. We enquired personally in the matter in the presence of some merchants here and you informed us that on account of rise in prices it is not at all possible to give delivery of the goods. Thereafter, you agreed to pay for the loss as would be decided by the undersigned four panchas and we agreed to accept the loss as would be fixed by the said panchas in cancellation of the contracts. As agreed between us, the panchas informed that you should pay today only Rs. 35,000 to us by way of loss on account of non-delivery of goods by you and that we should get the contracts satisfied fully. Accordingly, we have received from you a draft No. A 470961 for Rs. 35,000 drawn on Belgaum Bank Ltd., Bijapur, in our favour on their Go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... settlement clearly indicates that the contract on that day was subsisting and the amount of Rs. 35,000 paid by the assessee was under the contract. In Bhandari Rajmal Kushalraj v. CIT [1974] 96 ITR 401, this court has observed thus (at page 403) : "A contract can be settled only during the subsistence of the contract. If a breach occurs by the non-performance of the contract by actual delivery or transfer of the commodity or scrips and thereafter the parties to the contract settle the amount of damages by paying the difference between the contract price and the market price on the due date of performance that would not amount in law to settling a contract .... In order that a transaction may fall within the scope of the expression spec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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