Speculative transactions arise where commodity contracts end without actual delivery, making the resulting loss a speculation loss.

Transactions concluded without actual delivery of the commodity, even where pucca delivery orders were exchanged or differences were paid, fall within the statutory definition of speculative transactions under Explanation 2 to section 24(1) of the Income-tax Act, 1922. The court held that delivery of delivery orders is not actual delivery of goods, and that a contract is "settled" when it is determined or concluded, not only when replaced by a fresh agreement. On the facts, the assessee's contracts were discharged without real transfer of the commodity, so the resulting loss was speculation loss and not an allowable business loss.

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Issues: Whether transactions settled by exchanging pucca delivery orders without actual delivery of the commodity were speculative transactions under Explanation 2 to section 24(1) of the Income-tax Act, 1922, and whether the resulting loss could be treated as a business loss.

Analysis: The statutory definition treated a transaction as speculative when a contract for purchase or sale of a commodity was ultimately settled otherwise than by actual delivery or transfer of the commodity. The Court held that delivery of pucca delivery orders was not, by itself, actual delivery of the goods; actual delivery required real transfer of the commodity itself. On the facts, the assessee's purchase and sale contracts with the same party were concluded without such actual delivery and were effectively discharged by payment of differences. The argument that the contracts were merely performed and not settled was rejected, because the word "settled" in the Explanation means determined, concluded, or disposed of, and does not require substitution by a fresh agreement.

Conclusion: The loss arose from speculative transactions and was rightly treated as speculation loss, not as an allowable business loss.

Ratio Decidendi: For purposes of Explanation 2 to section 24(1) of the Income-tax Act, 1922, a contract is speculative if it is concluded without actual delivery of the commodity itself, and settlement by delivery orders or by payment of differences does not amount to actual delivery.

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