Speculative transaction treatment of delivery contracts did not bar set-off where business dealings were ordinary and delivery failed beyond control.

Loss arising from ready delivery contracts settled by payment of price differences was not treated as speculative business, so the assessee was entitled to the set-off claimed. Although settlement otherwise than by actual delivery brought the individual transactions within the technical definition of speculative transaction under section 43(5) of the Income-tax Act, the decisive question was whether the assessee carried on a speculative business. On the facts, the contracts were entered into in the ordinary course of business, most were performed by actual delivery, and the remaining contracts were adjusted only because delivery could not be made for reasons beyond control. The Board's circular treated such partly performed and partly adjusted contracts as exceptional and not liable to disallowance on the Department's theory.

---

---

Issues: Whether loss arising from non-fulfilment of ready delivery contracts, settled by payment of price differences, constituted a speculative transaction or speculative business so as to justify disallowance of the set-off claimed by the assessee.

Analysis: The settlement of the contracts otherwise than by actual delivery brought the individual transactions within the technical definition of speculative transaction under section 43(5) of the Income-tax Act, 1961. However, the crucial question was whether the assessee was carrying on a speculative business. On the facts, the contracts were entered into in the ordinary course of business, most were performed by actual delivery, and the balance were settled only because delivery could not be made for reasons beyond control. A ready delivery contract partly performed and partly adjusted by differences was treated by the Board's circular as exceptional and not to be treated as a speculative transaction for purposes of loss disallowance in the manner suggested by the Department.

Conclusion: The loss was not treated as arising from speculative business, and the assessee was entitled to the set-off claimed.

---