SIND NATIONAL SUGAR MILLS PRIVATE LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is a reference at the instance of the assessee under s. 66(1) of the Indian I.T. Act, 1922.

(2.) WE are concerned in this reference with assessment year 1961 -62. The assessee -company deals in sugar, hessian, gunny, gold, tea, jaggery, etc. It has is head office at Bombay with branches at several places such as Calcutta, Kanpur, Ahmedabad and Muzaffarnagar. It deals in both ready and forward business. The assessee's accounting year relevant to the assessment year 1961 -62 is the one ending on July 31, 1960. During this year the assessee -company claimed loss of Rs. 1,08,222 in forward transactions in jute and hessian. The case of the assessee -company initially before the ITO was that they were in the nature of hedging transactions and so this loss could be set off against other business income of the assessee -company. This plea was negatived by the ITO. He held that this loss had been suffered by the assessee in certain forward transactions where differences only had been paid and actual delivery of the goods had not been given or taken. In his view, therefore, these were speculative transactions as defined by Expln. 2 of s. 24(1) of the Indian I.T. Act, 1922.

(3.) THE assessee -company appealed to the AAC where the practice of the assessee -company was explained. It was contended that these were forward transactions and in the ultimate transaction the assessee had effected delivery.