Hedging losses on bullion forward sales qualify for relief only to the extent backed by stock on hand.

A departmental circular granting relief for losses on forward sales of bullion was applied only to bona fide hedging transactions entered into to protect stock on hand. Relief was confined to the extent of the assessee's raw materials or merchandise in hand, and losses arising from forward sales exceeding that stock remained speculative and outside the circular. The broader statutory construction question under the Indian Income-tax Act, 1922 was not answered because the claim was advanced on the circular's binding effect. The allowable portion of the loss was therefore to be worked out on a stock-supported basis.

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Issues: Whether the assessee was entitled to relief under the Central Board of Revenue circular in respect of losses arising from forward sales of bullion, and to what extent such losses could be treated as non-speculative.

Analysis: The reference arose under the Indian Income-tax Act, 1922 in respect of losses claimed on forward dealings in bullion. The Court declined to answer the broader statutory construction question on the meaning of the proviso to Explanation 2 to Section 24(1), in view of the assessee's election to rest its claim on the binding effect of the circular. The circular was read as a whole and was held to grant relief only to bona fide forward sales entered into to guard against loss on stock, and only to the extent that such transactions did not exceed the stocks of raw materials or merchandise in hand. Losses attributable to excess forward sales remained speculative and outside the relief.

Conclusion: The assessee was entitled to relief under the circular only to the limited extent permitted by it, and the Tribunal was required to work out the allowable part of the losses accordingly.

Final Conclusion: The reference was answered only on the circular-based claim, with relief confined to hedging sales supported by stock on hand, while the broader statutory issue was left unanswered.

Ratio Decidendi: A departmental circular granting relief for bona fide hedging sales must be applied as a whole, and the relief is limited to the extent of stock in hand owned by the assessee; losses on sales beyond that limit remain speculative.

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