BHANDARI RAJMAL KUSHALRAJ Vs. COMMISSIONER OF INCOME TAX MYSORE

JUDGEMENT

(1.) This is a reference at the instance of the Assessee made under S.256, (1) of the Income-tax Act, 1961, hereinafter called the Act. The question of law referred for the opinion of this Court is :

(2.) The Assessee carried on business in Kapas, Cotton and other sundry goods. There were purchases and sales of cotton bales and purchase of Kapas and sale of cotton after ginning. The Assessee returned a gross profit of Rs.1,75,524 for the assessment year 1967-68. The Assessee claimed a deduction of the sum of Rs.11,100 which was paid as difference to M/s. Patel Volkart Pvt. Ltd., and M|s. Krishna Rajendra Mills Pvt. Ltd , Mysore in respect of non-delivery of 200 bales of cotton to the former and 100 bales of cotton to the latter under separate contracts entered with the parties. The Income-tax Officer disallowed the deduction on the ground that they relate to speculative transactions. That finding was affirmed by the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal on second appeal. The question is, whether the sum of Rs. 11,100 claimed as deduction by the Assessee is a speculative loss or not? If it is speculative loss, then it is undisputed that the Assessee is not entitled to claim deduction of the said amount out of its profit under S.73 of the Act; but if on the contra the said amount is not speculative loss, then the Assessee is entitled' to the deduction of the same out of its business profits.

(3.) That the Assessee is a dealer in Kapas and Cotton is undisputed. The main business of the Assessee is not one of carrying on speculative business either in Kapas or in cotton. Similarly, the business of M|s. Patel Volkart Pvt. Ltd., and M/s. Krishna Rajendra Mills Pvt. Ltd., Mysore is also not one of carrying on speculative business as understood in common law.