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Issues: Whether the assessee's loss from purchase and resale of shares without actual delivery was a speculative loss within the meaning of section 43(5) of the Income-tax Act, 1961, so as to disallow deduction.
Analysis: The Court considered the statutory definition of speculative transaction under section 43(5), together with Explanation 2 to section 28 and section 73. On the facts found, the shares were purchased and resold on a principal-to-principal basis to the same counterparty without physical delivery, and only the difference between purchase and sale value was paid. The Court held that the absence of actual delivery brought the transaction within the statutory concept of a speculative transaction, and the assessee's contention that there was no initial intention to settle by differences could not prevail over the statutory scheme.
Conclusion: The loss was correctly treated as speculation loss and the disallowance was upheld.
Final Conclusion: The appeal failed, and the question of law was answered in favour of the Revenue on the footing that the share transaction loss was a speculative loss not allowable as a deduction.
Ratio Decidendi: For purposes of section 43(5) of the Income-tax Act, 1961, a share transaction settled otherwise than by actual delivery falls within the statutory definition of a speculative transaction, regardless of the assessee's alleged initial intention.
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