TaxTMI 
TaxTMI 
2024 (7) TMI 212
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....ding that the transactions undertook by the assessee are not speculative in nature as no actual delivery of goods was received by the assessee. 3. The appellant craves leave to add, amend, modify, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal." (There is error in the departmental grounds in as much this section is to reads 43(5) instead of 45(3).) 3. The assessee has also filed cross objections in Form 36A, on the following grounds sustained in appeal by the first appellate authority: Grounds of Cross Objections: "1. That the Ld. CIT(A) has erred in confirming the addition of Rs. 1,97,688/- on account of disallowance of proportionate interest on interest free advances u/s 36(1)(iii) of the Income Tax Act, 1961. 2. That the Ld. CIT(A) has failed to appreciate that the assessee has much more interest free funds available -and, as such, no such disallowance was called for in view of the binding judgment of Hon'ble Apex Court and Others." 3. That the respondent craves leave to add or amend any grounds of appeal before the appeal is finally heard or disposed off." ....
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....evenue is a speculative transaction u/s 43(5) of the Act 61 and should not have been considered as a business transaction, and the assessee is in appeal by way of cross objection on the issue of disallowance of interest of Rs.1.97 lakhs. 10. First we take up the issues in the departmental appeal. 11. The main point of contention of the revenue is that in the course of transaction of purchase and sales of edible oil, entered into by the assessee on the basis of high sea sales agreement, the assessee has not taken physical delivery of edible oil at the port of destination (ie at the port of delivery in India ),and the same has been taken delivery by the ultimate purchaser ( end user ) and the end user has paid the customs duty on such goods and as such, since no delivery of the goods has been taken by the assessee, it falls within the provisions of speculative transaction u/s 43(5) of the Act 61. 12. Now let us have a look at the provisions of section 43(5) of the Act 61. "A speculative transaction means a transaction in which a contract for purchase and sale of any commodity including stocks and shares is periodically or ultimately settled otherwise than by the act....
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.... after the loading of edible oil in the vessel a certificate of shipped weight and shipped quality final at port of loading is prepared by Independent Service Provider which is also an evidence of actual & physical delivery of goods by the entity making export of goods to the assessee who purchased the goods as importer. (ix) From the above stated facts, it stands established beyond any shadow of doubt that the goods were actually and physically delivered to the assessee company while purchasing the goods as importer. (x) Regarding the goods purchased by the assessee in transit from the port of loading to the port of delivery, the same type of documents proved that the goods were actually & physically delivered by the person who made the export of goods to the person who purchased the goods as first importer & the same goods were subsequently purchased by the assessee, during the course of transit & the actual and physical delivery was ultimately taken by the end user of the goods. (xi) The above said chain of events proves beyond any shadow of doubt that the actual & physical delivery of the goods was made by the person making the exports to the person m....
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.... the definition contained in Explanation 2 has severely restricted the meaning of the expression "speculative transaction" and in a sense simplified it for the purposes of the computation of income-tax. It has been provided that, subject to three exceptions, a speculative transaction means a transaction in which there is a contract for purchase and sale of commodities, where there is a periodical or ultimate settlement otherwise than by the actual delivery or transfer of the commodity. Simply put, it means that where there is no delivery under a settlement contract, it is a speculative transaction. On the other hand, however speculative the transaction might be, if there is delivery, it cannot be considered as a speculative transaction for the purposes of section 24." 17.2 The Ld. AR argues that from the above said findings of the Hon'ble Calcutta High Court it stands established that any transaction in which there is delivery, it cannot be considered as a speculative transaction. 17.3 The Ld. AR further relies upon the decision of the Andhra Pradesh High Court in the case of Lakshmi Narayan Trading Company (1995) 82 Taxman 301 (AP) and also on Rajasthan High Court in the cas....
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....se "settled periodically or ultimately", it would mean that in such a settlement of the contract delivery of the commodity was never contemplated at all. In other words, speculative transactions are such that the parties never contemplate delivery of the commodity but only trade in the documents of title." 17.5 The Hon'ble Rajasthan High Court while dealing with the provisions of section 43(5) in the case of Sripal Satyapal vs. ITO [2008] 217 CTR 337 (RAJ.) held in para 8 that there is no requirement in the provisions of section 43(5) for actual delivery or the transfer of commodity by the assessee or is agent but the emphasis is on that whether transactions entered into by the parties were settled by delivery of goods, (and for determining the speculative transaction in terms of 43(5) is that whether the transactions entered into by the assessee has been settled otherwise by way of actual delivery of the goods). The relevant part of the judgement is reproduced as under: - "8. that where the nature of transaction entered into between the parties is such that under the contract the seller parts with the possession of the ' goods and while the goods were in transit th....
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....vs ITO ( supra ) and on the views expressed by the Hon'ble Andhra Pradesh High court in the case of Lakshminarayan Trading Company ( supra ), and the judgment of the coordinate bench in ITA No 56/ ASR / 2020 in the assessee own case, we hold that the ultimate settlement of the transactions entered into by the assessee has been settled by the actual delivery of the goods to the ultimate buyer and thus the transactions of sale and purchase in the instant case does not fall within the provisions of section 43(5) of the Act 61 and are not speculative transactions . 20.1 All the grounds of appeal of the revenue relates to this single issue only, and the same are held to be without merits and the order of the Ld. CIT (A) on this issue is upheld. 21. The appeal of the revenue is dismissed. CO No: 04/ Chandi / 2022 22. Now coming to the cross objection filed by the assessee regarding disallowance of interest of Rs. 1,97,688/-. 23. The facts are that the assessee has made advance to three parties during the year namely G H Crop Protection Put Ltd, Homeland Enclave Ltd and J P Singh and Company, (the details of which are contained in assessment order page - 12, para- 18) for t....