- (1.) This appeal under section 260A of the Income Tax Act, 1961 (hereinafter referred to as 'Act') has been filed against the judgment and order of the Income Tax Appellate Tribunal dated 25.4.2003 by which the appeal of the assessee against the order of the Commissioner Income Tax Appeal has been allowed. It is sufficient to note the facts as noted in the order of the Tribunal to decide the questions raised in this appeal. In paragraph 2 of the order of the Tribunal, facts of the case have been noted in following words: "In brief the relevant facts are that the appellant-assessee is a Member of the U.P. Stock Exchange Association Ltd. And is registered as Stock Broker and carries on the purchase and sale of shares and securities. On scrutiny of the trading profit and loss account filed along with the return of income of Rs. 81,050/-, the Assessing Officer found that a sum of Rs. 8,53,030/- is debited for which the claim of the assessee was that it incurred loss in respect of transactions done by him on the floor of stock exchange with other brokers. The Assessing Officer rated the same as speculation loss as the loss of Rs. 8,53,030/- was on account of transactions for which there was no physical delivery. The appellant-assessee submitted before the Assessing Officer that the delivery had been effect at net basis as per the Stock exchange guidelines and no forward trading was allowed therefore there was no question of any speculation loss. The assessee's plea was also that otherwise the appellant-assessee's transaction was covered u/s 43(5)(c) of the Income Tax Act , therefore, the transaction carried out by the appellant-assessee were specifically exempted to be treated as speculative transactions but the Assessing Officer did not agree with the contentions of the appellant-assessee and disallowed the loss of Rs. 8,53,030/- being speculative in nature arising out of speculative transactions and the same could not be set off against other income and had to be carried forward and to be set off against speculative profit as per the provisions of Section 73(1). Therefore, after disallowing the loss of Rs. 8,53,030/-, the Assessing Officer computed the income of the appellant-assessee at Rs. 9,22,829/-. On appeal, the ld. CIT(A) agreed with the conclusions drawn by the Assessing Officer and dismissed the appeal of the appellant-assessee, therefore, the appellant-assessee is in present appeal before the Tribunal."
(2.) This appeal has been admitted on the following questions of law: "(1) Whether on the fact and in the circumstances of the case, the Income Tax Appellate Tribunal was correct in law in not upholding the order of the Assessing Officer and the Commissioner of Income Tax (Appeals) treating the loss of Rs. 8,53,030/- as speculative loss? (2) Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was correct in law in holding that the assessee's entire business is of non-speculative nature? (3) Whether the Income Tax Appellate Tribunal was correct in holding that the assessee was engaged in jobbing although the fact remains that the assessee was not registered as a jobber? (4) Whether Income Tax Appellate Tribunal was correct in law in holding that the loss incurred by the assessee was not speculative when the assessee could not give evidence of delivery of the scripts?"
(3.) We have heard Sri Shambhu Chopra, learned Counsel appearing for the appellant and Sri S.D. Singh, learned senior Advocate appearing for the assessee. The provisions of the Income Tax Act relevant for the issues raised in the appeal need to be noted first. Section 43 contains definition of certain terms relevant to income from profits and gains of business or profession. Section 43(5) deals with "speculative transaction". Section 43 (5) proviso (a) (b) and (c) which are relevant are quoted below: "(5) speculative transaction" means a transaction in which a contract for the purchase or sale of any commodity, including stocks and shares, is periodically or ultimately settled otherwise than by the actual delivery or transfer of the commodity or scripts: Provided that for the purposes of this clause-- (a) a contract in respect of raw materials or merchandise entered into by a person in the course of his manufacturing or merchanting business to guard against loss through future price fluctuations in respect of his contracts for actual delivery of goods manufactured by him or merchandise sold by him; or (b) a contract in respect of stocks and shares entered into by a dealer or investor therein to guard against loss in his holdings of stocks and shares through price fluctuations; or (c)a contract entered into by a member of a forward market or a stock exchange in the course of any transaction in the nature of jobbing or arbitrage to guard against loss which may arise in the ordinary course of his business as such member;";