Speculation loss in goods trading arises where no actual or constructive delivery proves completion of the purchase and sale.

Loss from trading in hessian cloth was treated as a speculation loss because the alleged purchase and sale had not matured into completed transactions. No earmarking or appropriation of the 900 bales from the larger lot was proved, and the pucca delivery order related only to a general lot of 1,500 bales. In the absence of evidence of actual or constructive delivery at either stage, the dealings remained agreements to buy and sell rather than completed transfers of goods. The loss therefore fell within the statutory concept of speculation loss, and the claimed set-off was denied.

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Issues: Whether the loss arising from the purchase and sale of hessian cloth was a speculation loss under the Indian Income-tax Act, 1922.

Analysis: The transaction was found not to have ripened into a completed purchase or sale because no earmarking or appropriation of the 900 bales out of the larger lot was established. The pucca delivery order related to a general lot of 1,500 bales, but there was no material to show that the specific 900 bales were constructively delivered to or by the assessee. In the absence of proof of actual or constructive delivery at either stage, the dealings remained agreements to purchase and sell, bringing the loss within the statutory concept of speculation loss.

Conclusion: The loss was rightly treated as a speculation loss and the answer to the referred question was in the affirmative, against the assessee.

Final Conclusion: The reference was answered in favour of the Revenue, and the assessee was denied the claimed set-off.

Ratio Decidendi: A transaction in goods does not cease to be speculative unless the particular goods are shown to have been completed by actual or constructive delivery through identifiable appropriation or transfer.

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