B.P. Jeevan Reddy, J. - (1.) These appeals by the assessee are preferred against the judgment of the Madras High Court answering the question referred to it in favour of the Revenue. The question stated for the opinion of the High Court under Section 66(1) of the Income-tax Act, 1922 was "whether on the facts and in the circumstances of the case, the transactions resulting in the loss of Rs. 2,04,746/- in the previous year relevant for the assessment year 1960-61 and in the loss of Rs. 17,000/- in the assessment year 1961-62 were saved from being treated as speculative transactions by Clause (a) of the third proviso to Section 24(1) of the Income-tax Act, 1922."
(2.) The assessee is a registered firm carrying on business in cloth and yarn. Its Head-Office is at Madurai with branches at Vijayanagaram and Calcutta. Its trade in cloth consisted mainly in Gada manufactured by certain mills including Meenakshi Mills Ltd., Virudhnagar Textiles Ltd. and Loyal Textiles Mills Ltd. The assessment years concerned herein are 1960-61 (previous year ending on 12-4-1960) and 1961-62 (previous year ending on 12-4-1961). In his assessment orders, relating to these two assessment years, the Income-tax Officer held that the losses of Rs. 2,04,746/- and Rupees 17,000/- respectively sustained by the assessee in the said two assessment years constituted losses in speculative transactions in the nature of business and, therefore, could not be set off except against profits from speculation. He carried forward the said loss to be set off against speculation profits, if any, in subsequent assessment years. The assessees appeal to the Appellate Tribunal proved unsuccessful. However, his further appeal to tribunal was upheld. Before the tribunal, the counsel for the assessee conceded that "the transactions in question are speculative transactions within the meaning of the explanation". (The reference is to Explanation 2 to Section 24). His contention, however, was that the transactions in question are saved under Clause (a) of the proviso to Section 24. The Tribunal examined the said contention with reference to the facts of the case and concluded that the transactions entered into by the assessee were in the nature of the hedging contracts and, therefore, saved under Clause (a) of the proviso. Dissatisfied with the order of the Tribunal, the Revenue asked for and obtained the above reference. Before the High Court as well, counsel for the assessee conceded that the transactions in question are speculative transactions but contended that they are saved by Clause (a) of the third proviso to Section 28. This is what the High Court has recorded: "In this case it has been conceded at all stages by the assessee that the transactions in respect of which the losses in question have occurred are speculative transactions as defined in Explanation 2, and, therefore, it is not necessary for us to consider the scope of the Explanation 2 to Section 24. The only question for consideration is whether the transactions which are admittedly speculative coming within Explanation 2 to Section 24 (1, will fall within the scope of Clause (a) of the third proviso to that section."
(3.) The High Court disagreed with the interpretation placed by the Tribunal upon Clause (a) of the said proviso and held that on the material placed before it, it is not possible to hold that the transactions in question were saved by Clause (a) of the third proviso. Accordingly, it answered the question referred in the negative - that is against the assessee and in favour of Revenue. The correctness of the view taken by the High Court is challenged in this appeal.;