Speculative loss treatment turns on actual delivery: transactions settled only by delivery orders and cheques were not set-off eligible.

Transactions settled only by delivery orders and cheques, without evidence of actual delivery of goods to the assessee or onward purchasers, fall within Explanation 2 to Section 24(1) of the Indian Income-tax Act, 1922 as speculative transactions. On that basis, the resulting loss is not an allowable set-off under Section 24(1). The Court's reasoning turned on the absence of actual delivery, which was sufficient to characterise the dealings as speculative and support Revenue's position.

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Issues: Whether the loss arising from transactions settled by delivery orders, without actual delivery of goods, was a speculative loss within Explanation 2 to Section 24(1) of the Indian Income-tax Act, 1922 and therefore not allowable to be set off.

Analysis: The transactions were settled only by delivery orders and cheques. There was no evidence of actual delivery of the goods either to the assessee or to subsequent purchasers. In the absence of actual delivery, the transactions fell within Explanation 2 to Section 24(1) and were speculative transactions. The view was consistent with the binding legal position applied by the Court.

Conclusion: The loss was correctly treated as arising from speculative transactions and was not allowable to be set off under Section 24(1); the finding was in favour of Revenue.

Ratio Decidendi: Transactions settled without actual delivery of goods, where only delivery orders and cheques pass between parties, are speculative transactions within the meaning of Explanation 2 to Section 24(1) of the Indian Income-tax Act, 1922.

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