TMI Blog1979 (1) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... and 1961-62. It may be mentioned that the corresponding previous year of the assessee is the Samvat year. In these three years the assessee claimed losses resulting from forward dealings in bullion in the amounts of Rs. 43,285, Rs. 55,781 and Rs. 87,280, respectively. Before the ITO the assessee claimed that the forward dealings in bullion were hedging transactions. It was explained to the ITO that the assessee had regular business in gold and silver and as such it held large stocks of the same. In order to protect itself from losses on account of market fluctuations the firm was required to enter into hedging transactions. According to the assessee, forward sales were effected against the stocks on hand. It was conceded that at times the forward sales would exceed the stocks on hand, but despite this it was submitted that they were mainly in the nature of hedging transactions against ready stocks of gold. The ITO asked the assessee to file details showing the day to day stock position against which forward sales were made. The ITO found from such statements filed by the assessee that the forward sales exceeded the stocks available. Accordingly, the ITO felt himself unable to acce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shown to and considered by the AAC. The circular, however, could not be produced before the Tribunal. The Tribunal, however, appears to be of the view that it was not concerned with what had been provided by the circular, and was required to apply the statutory provisions as were found on the statute book. The Tribunal indicated its opinion that if the claim of the assessee was not warranted by the express phraseology of Expln. 2 to sub-s. (1) of s. 24 and prov. (a) thereto, then the assessee was not entitled to succeed even though the CBR may have expressly, by a circular, indicated that the taxing authorities should give relief in cases similar to those of the assessee. A copy of this circular has been, by consent, annexed with the statement of case in this court and marked as annex. " D ". Before us Mr. Dastur appearing on behalf of the assessee made a number of submissions with regard to the proper meaning to be put on prov. (a) and it was submitted that it was not confined or limited to cases where the forward transactions were entered into against actual or existing practice of sales of merchandise. Similarly, it was submitted that, on a fair reading, the proviso could not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Expln. 2 to s. 24(1) or on prov. (a) thereto. The relevant portion of the circular may be fully set out : " F. No. 4(124)-60/TPL CENTRAL BOARD OF REVENUE New Delhi, the 12th September, 1960 21st Bhaira 1882 (Saka) CIRCULAR NO. 23 (XXXIX-4) D of 1960 Sub: Section 24 of the Income-tax Act-Hedging and speculative transactions-Representations regarding. A number of representations and suggestions have been received by the Board from associations and chambers of commerce regarding the manner in which the provisions of section 24 of the Income-tax Act, particularly those of Explanation 2 to sub-section (1) thereof, are being interpreted and applied by the Income-tax Officers. The Direct Taxes Administration Enquiry Committee have also made a few suggestions on this subject in Chapter III of their report. The Board have carefully considered the points involved and their decisions thereon are given below: Point (i) : Under clause (a) of the proviso to Explanation 2 to section 24(1) of the Income-tax Act, the I.T.O.s exclude from the category of speculative transactions only a ' hedging purchase ' transaction entered into with reference to the specific contracts for sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vered by the Board's clarification for giving relief to the assessee. To the extent of the excess the loss would not be entitled to relief and would, according to the decision of the Board, be required to be treated as a speculative loss. Mr. Dastur, however, submitted that the proper manner in which to apply and give effect to this decision was to consider the decision as giving relief in respect of hedging sales as indicated in the decision. It was submitted that if the Board had decided and instructed the ITO to treat such commercial hedging sales as not being speculative in nature, it was not open for the Board thereafter to restrict the relief in the manner it has been done, restricting it only to the extent of the hedging sales to the extent of the total stock of raw material or merchandise-in-hand. We have been unable to accept such submission advanced on behalf of the assessee. Such decisions of the Board which may even go beyond the language of the statutory provision, are required to be read as a whole and no sentence or part thereof can be read in isolation from the remaining portion. It is, therefore, not permissible to hold that the Board had decided and directed the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oes a contract of purchase include a mere agreement to purchase ? It would appear to us that, if understood in this larger sense, the relief given to the assessee would go beyond the limit contemplated by the circular of the CBR. The circular clearly restricts the application of the decision on point No. (i) to " merchandise-in-hand ". It also uses the words " ready stock " and thus it would seem to be restricted to the items of stock which are of the ownership of the assessee, merchandise in respect of which property has already passed to the assessee as distinguished from such items in respect of which he may merely have an agreement to purchase. The effect of the circular, in our opinion, is required to be restricted to such items of the assessee's stock which are of his ownership although the phrase " in hand " may perhaps be understood in a commercial sense as implying within his control. To that extent we must express our difference in approach from conclusion No. 3 as indicated by the Full Bench of the Gujarat High Court. It would appear to us that in view of the clear position taken by the learned counsel for the assessee, question No. 1 need not be answered. Accordingly, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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