COMMISSIONER OF INCOME TAX Vs. ASHOKBHAI B SHAH

JUDGEMENT

(1.) AT the instance of CIT, Baroda, the following questions of law have been referred to the decision of this Court which arose out of its order in ITA No. 893/Ahd/1978 79 relating to asst. yrs. 1975 76. We have heard the learned counsel for the Revenue. None appears for the assessee in spite of service :

(2.) THE assessee is an individual and he carries on business in shares. The assessee sustained loss of Rs. 8,128 in the previous year corresponding to asst. year 1975 76 on certain transactions of shares. The ITO disallowed the loss on the ground that the said loss in his opinion were speculation loss. It was on the basis that there was no actual delivery of the shares at the time of purchase or sale. The AAC confirmed the finding for the said reason. However, the Tribunal found that the loss suffered by the assessee was not a loss in the nature of speculation because the assessee has sold 195 shares out of its stock in hand. The loss being incidental to the business of the assessee and having been undergone in the normal course of carrying on business by the assessee, it had allowed the loss.

(3.) THIS Court had an occasion to deal with the interpretation of the aforesaid provisions. In the case of CIT vs. Mohanlal Ranchhoddas (1992) 108 CTR (Guj) 22 : (1993) 203 ITR 304 (Guj) : TC 19R.470, referring to the provisions of S. 43(5)(b), the Court held that the only condition which should be satisfied before he can claim that a contract entered into by him should not be considered as a speculative transaction is that he must have entered into such a contract to guard against the loss due to adverse price fluctuations of shares in respect of which he might have entered into contract of sale by actual delivery. The Court further held :