TaxTMI 
TaxTMI 
2024 (12) TMI 815
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....d in law and on facts in confirming the action of AO in considering the loss of Rs.10,05,28,283/- incurred in the business of trading in commodities on HSS as speculation loss instead of business loss declared by the appellant and accepted by department in the scrutiny assessments year after year. 2.2. The AO as well as Ld. Appellate Authority failed to appreciate that in case of purchase & sale on HSS, delivery of the underlying commodities are respectively taken & given by endorsement of Bill of Lading acknowledging the carriage of goods through ship. 2.3. That in the facts and circumstances of the case as well as in law, the Ld. Appellate Authority ought not to have upheld the impugned loss incurred in the business of trading in commodities on HSS as speculation loss instead of business loss. 3.1. The Ld. Appellate Authority, although rightly held that other income of Rs. 3,11,142/- has been considered by the appellant while arriving at loss but, has erred in law and on facts in confirming the action of AO in considering the same as income from other sources. 3.2. The AO as well as Ld. Appellate Authority failed to appreciate that impugned oth....
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.... whom these are to be delivered within a prescribed period at a predetermined price. It is submitted that, profit or loss earned by the assessee depends on the difference between the predetermined price and the prevailing market price which is very volatile due to the market conditions including the demand and supply position in the local market as well as international market, fluctuation in commodity market and exchange rates. 2.4. The Ld. AO after considering the submissions of the assessee was of the opinion that, the purchase and sales shown by the assessee are one of a forward contract and that the assessee do not take actual delivery of the goods from its vendor's nor gives actual delivery to its purchaser. The Ld. AO thus held that assessee is indulged in speculative transaction based on future contracts, wherein, there is no delivery of goods at all. He thus disallowed the business loss earned by the assessee to be speculative and the same was allowed to be carry forwarded to the next year to set-off against any speculative profit. 2.5. The Ld. AO also treated the income declared by the assessee under the head other income mainly comprising of export incentives and e....
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....he original seller being the exporter transfer possession of the commodity by parting with the commodity at the time of uploading on the vessel to be delivered to the original buyer that at the specified port. Such transfer is the same acknowledged by a document called "Bill of lading". 5.2. He submitted that, during the course of transit, the buyer enters into a contract with the subsequent buyers for sale of commodity loaded on the vessel and deliver the same by endorsing the bill of lading in favour of subsequent buyer. 5.3. Once a vessel reaches the port, the ultimate subsequent buyer takes physical delivery of the commodity, after payment the customs duty. The Ld.AR thus submitted that, in case of high seas transaction there is physical delivery of goods by the original seller to the ultimate buyer, and therefore such transactions does not fall within the sweep of the definition under section 43 (5) of the act. 5.4. The Ld.AR drew our attention to the definition of "documents to the title of goods" as per section 2 (4) of The Sale of Goods Act 1930, that reads as under: "document of title to goods include a bit of leading, talk warrant, warehouse keepers cert....
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....he act. 5.8. The Ld.AR further submitted that the assessee's turnover of sale and purchase are accepted under the state VAT act. In support, he filed sales tax assessment order in the paper book placed at page 21-30. He also relied on the assessment order for assessment year 2012-13 wherein, the assessing officer himself after verifying the claim of high seas transaction by assessee accepted the to be business transaction. 5.9. On the contrary the Ld.AR DR placed reliance on the orders passed by authorities below. We have perused submissions advanced by both sides in the light of records placed before us. 6. High Seas Sale is a common trade practice where the original importer sells the goods to the buyer before the goods are entered into customs clearance of the port where the voyage ends i.e. before filing the first bill of entry, either for home consumption or for warehousing, as the case may be. 6.1. The relevant provisions for deciding this appeal are extracted as under: Definitions of certain terms relevant to income from profits and gains of business or profession. 43. In sections 28 to 41 and in this section, unless the context otherwise req....
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....ansfer, or settlement. Even if the goods or commodities involved are inherently speculative, the crucial factor remains to establish actual delivery. Thus it is clear that, when delivery of the goods are not taken, the transaction is treated as speculative in nature. 6.3. But in assessee" s case the entire transaction is going through a process where delivery of goods take place and documents evidencing delivery of goods related to high sea sale are Bill of Lading which has not been disputed by the revenue authorities. 6.4. The Ld.AR has submitted that, in the present facts of the case actual delivery took place, though there was successive sales of the same commodity which is also delivered physically to the ultimate purchaser. He placed reliance on the decision of Hon'ble Rajasthan High Court in case of Sripal Satyapal vs ITO reported in (2008) 217 CTR 337 and the decision of Hon'ble Andhra Pradesh High Court in case of CIT vs Lakshminarayanan Trading Company reported in (1995) 82 taxman 301 in support of the argument that the case would not fall under the category of speculative transaction. 6.5. Hon'ble Andhra Pradesh High court in case of CIT vs Lakshminarayanan T....
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.... other words, speculative transactions are such that the parties never contemplate delivery of the commodity but only trade in the documents of title." 6.6. Hon'ble Rajasthan High Court SripalSatyapal vs ITO (supra) while dealing with the provisions of section 43(5) held 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 judgment 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 the buyer enters into subsequent transaction, then so far as the first seller and the first buyer -are concerned, there would be actual delivery of the goods as the first seller and having parted with the....