COMMISSIONER OF INCOME TAX Vs. TEXTILES

JUDGEMENT

(1.) THE Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, has referred the following question of law for the opinion of this court under Section 256(1) of the Income-tax Act, 1961, arising out of its order dated July 22, 1980, for the assessment year 1974-75 :

(2.) THE brief facts of the case are that the assessee had shown a loss of Rs. 16,426 in the cotton account and the entry was passed through the "Nakal Bahi" on the last date of the accounting year. This difference was paid on account of purchase and sale of 100 cotton bales which were through Messrs. Basant Kotak and Bros., Bombay. THE Income-tax Officer held that it is a speculative transaction and as such cannot be adjusted against the business income and has to be carried forward for adjustment in the subsequent years against speculation profits.

(3.) THE Andhra Pradesh High Court in Addl CIT v. Maggaji Shermal [1978] 114 ITR 862 on the basis of the Explanation 2 to Section 28 came to the conclusion that, in order to constitute a speculative business, there should be more than one speculative transaction carried on by the assessee and an isolated instance of a single transaction would not constitute a speculative business and no reasoning was given in this case inasmuch as the definition in Section 2(13) of the Act and the provisions of the General Clauses Act as contained in Section 13(2) were also not taken into consideration.