Ray, J. - (1.) The question in this reference is as follows: Whether on the facts and in the circumstances of the case the transaction which resulted in the loss of Rs. 33,736 was a speculative transaction within the meaning of explanation 2 to Section 24(1) of the Indian Income-tax Act, 1922, and therefore the said loss should not be allowed to be set off under Section 240) of the said Act
(2.) The relevant assessment year is 1959-60 and the corresponding previous year is Dewali year 2015 ending on 9th November, 1958. The respondent assessee is a partnership firm having business in paper bags, gunny bags and other commodities. During the relevant previous year it had entered into transactions in gunny bags entailing purchase and sale of delivery orders. This was done according to the prevailing practice in the Calcutta Jute trade where formal transactions in gunny, hessian etc. are carried on by the transfer of the relative delivery orders only on full payment of the purchase or sale prices. There is no actual delivery of the commodities and this happens because of the fact that the manufacturers of the Jute Goods do not normally come into contact with the shippers, namely, the exporters. It is only through chain of contracting parties for the jute goods from the manufacturers that the Shipper obtains goods from the manufacturer. The intermediaries actually affect delivery by transferring the delivery orders and the assessee is one of such intermediaries. It is an admitted fact that no delivery of goods was either given or taken by the assessee who suffered loss of Rs. 33,736 out of such transaction entered into during the relevant accounting year.
(3.) In Explanation 2 to Section 24(1) of the Indian Income-tax Act a speculative transaction means the transaction in which a contract for purchase and sale of any commodity including stock and shares is periodically or ultimately settled otherwise than by the actual delivery or transfer of the commodity or goods.;