COMMISSIONER OF INCOME TAX Vs. RATAN LAL MOHANLAL

JUDGEMENT

(1.) THE Income-tax Appellate Tribunal, Delhi Bench "B", has referred the following questions of law for the opinion of this court, at the instance of the Commissioner of Income-tax, Lucknow. THE questions are:

(2.) THE assessee was dealing in oil, oil-cakes, etc. In respect of its business it used to purchase oil and oil-cakes in bulk from the mills or big arhatias and sell them in wholesale and partly in retail basis. Such purchases were mostly made by entering into contracts about the rate and date of delivery. When, for various reasons, these contracts were not fulfilled and delivery of goods was not taken, the transaction used to be settled on the basis of difference between the prevailing market rate and the contractual rate. In this way the assessee suffered a loss of Rs. 38,026, in the previous year pertaining to the assessment year 1960-61. THE assessee claimed that these losses represented liquidated damages and were liable to be set off as against the profits earned by it during the year from ready business. THE department, however, claimed that these were speculation losses which could be adjusted against the profits of speculation business. THE Income-tax Officer rejected the contention of the assessee and declined to set off these losses against the profits earned by the assessee from non-speculation business. In appeal the Appellate Assistant Commissioner upheld the order made by the Income-tax Officer. THE assessee filed a second appeal before the Income-tax Appellate Tribunal. THE Tribunal came to the conclusion that the losses suffered by the assessee were speculation losses. Relying upon a decision of this court in Income-tax Reference No. 777 of 1961, it held that these speculation losses could be set off against the profits of other business of the assessee. THE department then moved an application for referring the two questions for the opinion of this court.

(3.) IN the circumstances, we answer the first question in the affirmative and the second question in the negative. The Commissioner of INcome-tax is entitled to his costs which we assess at Rs. 200. Counsel's fee is also assessed at the same figure.