NIRMAL TRADING COMPANY v. COMMISSIONER OF INCOME TAX, CENTRAL (CALCUTTA) (2)

Citation: [1980] 1 S.C.R. 900

Court: Supreme Court of India

Bench: N.L. UNTWALIA, R.S. PATHAK

Case summary

-This appeal by certificate under section 66A (2) of the Indian Income Tax Act, 1922 relates to the application of Explanation 2 to s.

Judgment text

1/t.. NIRMAL TRADING COMPANY v. j COMMISSIONER OF INCOME TAX, CENTRAL (CALCUTTA) .. October 10, 1979 [N. L. UNTWALIA AND R. S. PATifAK, JJJ "Speculative transactioni'-Traruactions of sale and purchase settled by harul· i1ll over delivery order. J. and payment by chequea-Transacti'ons are 'Speculati'lff TraruactJ'on. t'' and attract the provisions of Explanation 2 to section 24(1) of lncome·tax Act, 1922. '. The assessee entered into several transactions of sale and purchase with different parties, and the transactioas were settled by handing aver delivery orders. There was no evidence and no plea was taken tbat actual delivery of the goods was ever effected either to the assessee or to the subsequent pur· chasers from him.

Dismissing assessee's appeal by certificate under section 66A(2) of the Income Tax Act 1922, the Court HEID : In the absence of any suggestion that actual delivery of goods was ultimately effected and in view of the case of the assessee, throughout being that banding over of the delivery orders was sufficient as constituting actual delivery of the goods, the transactions, in the present case, attracted Explana· lion 2 to section 24(1) of the Income-tax Act, 1922. [90! C-E] Davenport & Co. (P) Ltd. v. Commissioner of Income-tax, West Bengal II, (1975) 100 I. T. R. 715, followed. CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2310 of 1972. . )( From the Judgment and Order dated 11-12-1970 of the Calcutta High Court in Income Tax Ref. No. 101/62. P. V. Kapoor, Anil Sachthey, Miss Bina Gupta and Praveen Kumar for the Appellant. T. A· Ramachandran and Miss A. Subhashini for the Respondent. The Judgment of the Court was delivered by j PATHAK, J.

-This appeal by certificate under section 66A (2) of the Indian Income Tax Act, 1922 relates to the application of Explanation 2 to s. 24(1) of the Indian Income Tax Act. The assessee deals in paper, hessian and B. Twill. After assessment by the Income Tax Officer for the assessment year 1955-56, and thereafter an appeal disposed of by the Appellate Assistant Commissioner, the Income Tax Appellate Tribunal in secood appeal found that certain transactions entered into by the assessee could not be NIRMAL TRADING CO. V. C. I. T. (Pathak, J. ) 911 described as "speculative transactions" within the meaning of Explanation 2 to s. 24 ( 1) of the Indian Income Tax Act, 1922 and allowing the appeal it directed that the loss suffered by the assessee should be set-off under s. 24 (1) of the Act.

At the instance of the Revenue, the Appellate Tribunal referred the following question to the High Court at Calcutta for its opinion :- "Whether, on the facts and in the circumstances of the case, the loss of Rs. 1,03,688/- was the result of speculative transactions within the meaning of Expi:μlation 2 to section 24(1) of the Indian Income Tax Act, 1922, and therefore, was not allowable to be set off under section 24(1) of the said Act ? " The High Court has answered the question in favour of the Revenue. It appears the assessee entered. into several transactions of sale and purchase with different parties, and the transactions were settled by handing over delivery orders. There is no evid,ence that actual delivery of the goods was ever effected either to the assessee or to subsequent purchasers from him. All that passed were the delivery orders and payment by cheque.

The High Court has taken the view that in the absence of actual delivery the transactiolls attracted Explanation 2 to s. 24(1) and must be regarded as "speculative transactions. " It seems to us that the High Court is right having regard to El the law laid down by this Court in Davenport & Co. P. Ltd. v. Commissioner of Income-Tax, West Bengal II('). It is urged on behalf of the assessee that the case falls under Raghunath Prasad Poddar T. Commissioner of Income-Tax Calcutta. (') But that decision has been overruled by this Court in Davenport & Co. P. Ltd. (supra), and in any event no question of invoking that decision arises because in the present case there has never been any suggestion that actual delivery of goods was ultimately effected. The case of the assessee throughout has been that handing over of the delivery orders was sufficient as constituting actual delivery of the goods. In the' result, the appeal fails and is dismissed with costs. S. R. Appeal dismissed.

(t) [1975) JOO I. T. R. 715. (2) [1973] 90 I. T. R. 146.