COMMISSIONER OF INCOME-TAX Vs. AGRAWAL BROTHERS

JUDGEMENT

(1.) THIS is a reference made by the Income-tax Appellate Tribunal, Indore Bench, at the instance of the department.

(2.) THE facts giving rise to this reference are that the assessee returned income of Rs. 12,811 after charging to the accounts loss, claimed to be hedging loss, amounting to Rs. 93,554. The ITO observed that the loss arose from forward contracts entered into by the assessee which were settled otherwise than by actual delivery of transfer of goods. The losses were claimed by way of difference in the accounts dealt with by the assessee. Before the ITO, it was, however, claimed that to the extent of Rs. 38,230, the difference in price debited to the difference account, pertained to the ready business and the balance of Rs. 56,248 was covered by prov. (a) to Section 43 (5) of the I. T. Act, 1961, which corresponds to prov. (a) to Expln. 2 to Section 24 (1) of the Indian I. T. Act of 1922. The ITO held that whole of the loss of Rs. 98,091 arose from speculative transactions and could not be set off against other business income 'or other heads of income and that the same was liable to be carried forward to be set off against income from specultive transactions in future years.

(3.) ON appeal before the AAC, it was pointed out that to the extent of Rs. 38,230 the type of losses were such that they arose from purchase of goods from one party and sale to another party, the losses arising therefrom only being debited to the trading account. It was further shown that the said loss arose in respect of some 42 transactions. The AAC further found that in all these cases there was a contract for purchase of goods and the goods were actually delivered. He, accordingly, held that to the extent of Rs. 38,230 the loss was a regular trading loss.