Ramaswami, J. - (1.) These appeals are brought by special lease by the Commissioner of Income-tax Kerala, from the judgment of the Kerala High Court dated September 2, 1964, in I. T. R. No. 69 of 1963.
(2.) The assessee is a member of an association for speculation in coconut oil. The assessee also speculates on its own. It also receives orders from its constituents who are not members of the association to speculate on their behalf. The procedure is as follows : The assessee receives a phone instruction or telegram to buy or sell a certain quantity. Immediately it enters it into its books and informs that party of the sale or purchase having been effected. But as only members can deal with the association, actually no such purchase or sale is made through the association in the name of that particular person though no doubt there are other purchases or sales in forward transactions by the assessee itself. The dates for settlement as also the rates at which the transactions are entered into are settled. On the relevant date, as per the agreements entered into between the parties settlement is made, profit either being paid to that party or received from it having regard to the rates obtaining on that day and the rate at which the transaction was entered into. On each such transaction the assessee also receives a commission from the party on whose behalf the transaction was done. The assessee claimed that such commission received should be set off against its speculation losses on the ground that the commission received for placing forward contracts of this kind should be taken as part of its income from speculation. The Income-tax Officer rejected this claim. The Appellant Assistant Commissioner on appeal held that the commissioner received was profit arising out of speculation and was incident to the speculation business carried on by the assessee and accordingly deleted the additions from the assessment for three years. The income-tax department appealed to the Appellate Tribunal which upheld the order of the Appellate Assistant Commissioner and dismissed the appeal. The Appellate Tribunal thereafter referred the fallowing question of law to the High Court under section 66 (1) of the Income Tax Act, 1922 : "Whether, on the facts and circumstances of the case the Appellate Tribunal was correct in holding that commission received by the company amounting to Rs. 41,197 (for 1958-59), Rs. 39,730 (for 1959- 60), and Rs. 22,652 (for 1960-61), should be assessed under the head speculation business and not under regular business in th companys assessments for the years ended March 31, 1959, March 31, 1960, and March 31, 1961 -
(3.) By its judgment dated September 2, 1964, the High Court answered the question in the affirmative and in favour of the assessee.;