RAMASWAMI - (1.) JUDGMENT The judgment of the court was delivered by
(2.) THESE appeals are brought, by special leave, on behalf; of the Commissioner of Income-tax, Kerala, from the judgment of the Keralal High court dated 5/04/1962, in R. As. Nos. 1089-1090 of 1958-59. 75 The respondent (hereinafter called the "assessee") is an oil miller who purchases coconuts and copra for extraction of oil in his own expellers or chekkus for the market. The purchases of the raw materials, coconuts and copra, are made ready for spot delivery as also for delivery in Vaida dates. The sales of oils were also made on the same basis by the assessee. All these contracts, ready and forward, are on a large scale and are put through either the Alleppey Oil Millers' Association, commission agents or other merchants. The aforesaid contracts are of two varieties; those on which delivery was intended and those intended to be settled on the Vaida dates, only for price differences. The latter type, forward contracts, for purchase or sale, are all entered in a single account called " Oil Vaida Price Difference Account ". During the calendar years 1952 and 1953, which are the "previous years "corresponding to the assessment years 1953-54 and 1954-55, the assessee entered into several forward contracts for purchase of copra and sale of oil through the "Alleppey Oil Merchants' Association " and recorded in the " Oil Vaida Price Difference Account " in the manner aforesaid on which the following net losses were incurred : JUDGEMENT_74_ITR67_1968Html1.htm The Income-tax Officer refused to deduct the aforesaid losses in the assessment, holding that they were losses from separate speculative business within the meaning of Explanation 2 to section 24(1) of the Income-tax Act, 1922 (hereinafter referred to as " the Act "), requiring to be set off only in future years against similar speculative business profits. The assessee appealed to the Appellate Assistant Commissioner who allowed the appeals. The Commissioner of Income-tax further took the matter in appeal to the Appellate tribunal, which remanded the case for further investigation with a view to ascertain the extent to which the transactions would come within the meaning of proviso (a) to Explanation I of section 24(1) of the Act. On further hearing of the appeal after remand, there was a difference of opinion between the two Members of the tribunal on the following point : "Whether the losses of Rs. 26,248.00 and Rs. 14,043.00 incurred by the assessee in the settlement of forward contracts in coconut oil in which also he traded during the calendar years ended 1952 and 1953, the previous years for the respective assessment years 1953-54 and 1954-55, are deductible as business losses under section 10 in the respective assessments ?"
(3.) THEREUPON the President made a reference under section 5A(7) of the Act to three other Members of the tribunal including himself. All the three 76 members agreed with -the Judicial Member and held that the two sums mentioned are not deductible as business losses under section 10 of the Act. At the instance of the assessee, the Appellate tribunal referred the following questions of law for the opinion of the High court under section 66(1) of the Act: "(1) Whether there are materials for the tribunal to hold that the aforesaid transactions constitute speculative transactions in the nature of a business within the meaning of the first proviso to section 24(1) ? (2) Whether the losses are deductible under section 10 as business losses of the two assessment years 1953-54 and 1954-55 ?" By its judgment dated 5/04/1962, the High court answered the first question in the negative and the second in the affirmative. In other words, both the questions were answered in favour of the assessee.;