2016 (6) TMI 556

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....assails correctness of the CIT(A)'s order allowing loss of Rs. 33,18,790/- thereby reversing Assessing Officer's action in treating the same to be speculative in nature u/s. 43(5) of the Act. 3. We come to relevant facts first. The assessee company deals in ginning/processing of cotton bales. It debited settlement expenses of Rs. 33,18,790/- in P & A. This comprised of payments of Rs. 12,38,540/-, Rs. 10,47,684/- and Rs. 10,32,566/- made on 18-01- 2009, 20-01-2009 and 30-03-2009 in cases of M/s. Maruti Cotton Industries, Chamunda Cotton Pvt. Ltd and M/s Arihant Trading Co.; respectively. It pleaded that it had entered into different contracts with the three payees to purchase cotton at fixed rate. The same stood cancelled due to price fl....

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....cts. The AO has held that these transactions are speculative transactions. He has further held that the speculative transactions carried on by the appellant are of such nature as to constitute a business and therefore, separate, from any other business. Accordingly, he has disallowed the entire loss of Rs. 33,18,790/-. On the other hand, the appellant has contended that he has entered into the impugned contracts in order to ensure continuous supply of cotton however, during the intervening period huge price fluctuation has taken place and the cotton was available at a much lower price than the contracted price. So under the circumstances, the contracts had to be cancelled to save the firm from further losses. Since the delivery was....

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....e of business. Therefore, though the impugned transaction are in the nature of speculative transaction and the same have also resulted into loss but having regard to the meaning of the speculation business the resultant loss cannot be termed as loss in a speculation business but it is loss in the business. Under the circumstances, loss incurred by the appellant is to be considered as business loss. Therefore, the disallowance made by the AO is directed." 5. Both parties reiterate their respective stands against and in support of the CIT(A)'s findings extracted hereinabove. There is no dispute that this assessee is already in cotton ginning business. It entered into cotton supply contracts. The same would be cancelled in lieu of passing o....