Case: Raghunath Prasad Poddar Etc Vs. Commissioner Of Income Tax, Calcutta

2. For deciding the question of law formulated above, it will be sufficient if we set out the facts in Civil Appeal No. 1037 of 1970. At the hearing we were referred to the facts of that case only.3. The assessee in Civil Appeal No. 1937 of 1970 is a company dealing inter alia, in jute and jute goods. In the assessment years 1957-58, 1958-59 and 1960-61 (corresponding accounting periods being calendar years 1956, 1957 and 1959), the assessee claimed Rs. 35,578/-, Rs. 20,665/- and Rupees 3849/- respectively as losses in its business in the sale and purchase of gunny bags. The Income-tax Officer treated those losses as speculative losses. He held that the contracts in respect of the gunny bags said to have been sold were settled only by delivery of Pucca Delivery orders (in short P. W. Os.) and not by actual delivery of the goods covered by those documents. He accordingly refused to set off those losses towards the profits made by the assessee in its nonspeculative business. The assessee appealed against these assessment orders. The Appellate Assistant Commissioner found that the assessee had purchased the P. D. Os. from various parties after paying the full price of the goods mentioned therein and transferred those P. D. Os. to his buyers after receiving the price fixed for the sale of those goods. The A. A C opined that the transactions in question represented purchases and sales of jute goods. The A. A. C. consequently held that the losses claimed by the assessee were losses from the ready business in jute goods. In pursuance of those findings he directed the Income-tax Officer to allow the losses claimed as business loss. The Department appealed against the order of the A. A. C. to the Income-tax Appellate Tribunal. The Tribunal following the decision of the Calcutta High Court in D. N. Wadhawana v. Commr. of Income-tax, West Bengal, (1966) 61 ITR 154 (Cal)   allowed the appeals filed by the Department. It held that the sales in question were speculative as contemplated by Section 24 of the Act. Consequently the losses in question cannot be set off towards the profits made in the assessees non-speculative business. Similar orders were made by the Tribunal in the case of other assessees. At the instance of the various assessees, questions similar to the question formulated above were submitted to the High Court to ascertain its opinion. The High Court following its decision in Income-tax Reference No. 88 of 1967 (Nanalal M. Varma and Co. (P) Ltd. v. Commr. of Income-tax, West Bengal II, (1969) 73 ITR 713  ) answered those questions in favour of the Department.

Reasoning:
7. The Tribunal has found that, when the assessees transferred the P. D. Os. to their buyers they had not actually delivered to the buyers the goods covered by the P. D. Os. That conclusion was not challenged. But it was urged on behalf of the assessees that the Tribunals finding by itself is not conclusive. They complain that the Tribunal has not gone into the question whether the last transferees of the P. D. Os. had taken actual delivery or not of the goods covered by the P. D. Os. It cannot be disputed that if any of the transactions were settled by actual delivery of the goods sold or transfer of that commodity, those transactions do not come within the scope of Explanation 2 to the proviso to Section 24 (1).In our judgment to effect a valid transfer of any commodity, it is not necessary that the transfer in question should be followed up by actual delivery of the goods to the transferee. Even if the goods are delivered to the transferees transferee, the first transfer also will be a valid transfer. Therefore, we have to see whether in the cases before us, the ultimate purchaser of the P. D. Os. has taken actual delivery of the goods sold. The Tribunal as well as the High Court were of opinion that if any transfer of the P. D. Os. is not followed up by actual delivery of the goods to the transferee, that transaction has to be considered as speculative. This is an erroneous conclusion.Neither the I. T. O. nor the A. A. C. and nor even the Tribunal has gone into the questions firstly as to what was trade practice at the relevant time and whether the last buyers of the P. D. Os. have taken actual delivery of the goods covered by those P. D. Os. They concentrated their attention solely on the question whether the assessees had given delivery of the goods covered by the P. D. Os. to their transferees. That was not the relevant issue. The crucial question of fact to be decided was whether the last buyers of the P. D. Os. had taken actual delivery of the goods covered by the P. D. Os.Mr. Sen relying on the decision of this Court in Duni Chand Ratarias case, (1955) 1 SCR 1071   = (AIR 1955 SC 182  ) (supra) urged thatwe should accept the trade practice pleaded by him and straightway allow the appeals. But no such trade practice appears to have been put forward before the authorities under the Act. That apart, the transactions effected by the assessees cannot be considered as a valid transfer of the commodity within the meaning of Explanation 2 to the proviso to Section 24 (l) of the Act until the actual delivery of the commodity in question takes place.Under the circumstances, it is not possible to answer the questions referred to the High Court. All that we can do is either to call for a supplementary Statement from the Tribunal or to remand these cases to the Tribunal for a fresh hearing. As seen earlier, the authorities under the Act have completely misdirected themselves as to the questions of fact to be decided. Hence there is need for a fresh enquiry. Therefore it will be in the interest of the parties to remand the cases to the Tribunal for a fresh enquiry on the lines suggested earlier. We order accordingly. The Tribunal may take additional evidence on the questions mentioned earlier. The parties may be given reasonable opportunity to adduce additional evidence both documentary as well as oral. The Tribunal may also take into consideration the bye-laws of the East India Jute and Hessian Exchange Ltd., Calcutta which bye laws, we were told, were in force during the calendar year 1959. We are sure the Tribunal will deal with these cases expeditiously as they are very old cases.