1. The assessee-firm carries on speculation business in shares, bullion and various other commodities. It is dealing in forward contracts in respect of Morarjee Gokuldas Spinning and Weaving Mills shares from November 24, 1961. The assessment year in question is 1964-65, the relevant accounting year being Divali year ending on October 17, 1963. On November 9, 1968, a party with whom the assessee had entered into a contract for forward delivery of shares wanted the contracts to be closed either by payment of difference or by actual delivery of shares. The assessee, therefore, borrowed 300 shares of Morarjee Gokuldas Spinning and Weaving Mills from one Smt. Savitridevi Gopalka and delivered them to the said party. The assessee-firm then purchased 530 shares, out of which 200 shares were returned to the said Savitridevi and the balance of 330 shares were sold in the market. In this transaction, the assessee made a profit of Rs. 38,101 and after deducting the bank charges of Rs. 41 the net profit came to Rs. 38,060 on the purchase and sale of shares. In the same year, the assessee had incurred a loss of Rs. 39,898 in his speculation business and he wanted this loss to be set off against the profit of Rs. 38,060 which the assessee wanted to be treated as profit from speculation business. The ITO held that since the profit arose from the transaction where there was actual delivery of shares, the profit could not be treated as arising from a speculative transaction.
2. In the appeal filed by the assessee, the AAC held that the order of the ITO was justified and the matter was, therefore, taken in appeal to the Tribunal by the assessee. The Tribunal took the view that where delivery of shares has been taken and given, a transaction does not come within the definition of a speculative transaction, and in the instant case, delivery of shares having been effected profit could not be said to arise from speculative transaction. The appeal filed by the assessee, therefore, came to be rejected. Arising out of this order of the Tribunal, the following question has been referred to us under s. 256(1) of the I. T. Act, 1961, at the instance of the assessee :
'Whether, on the facts and in the circumstances of the case, the profit of Rs. 38,060 was a profit from speculative transactions within the meaning of section 43(5) of the Income-tax Act, 196 ?'
3. Mr. V. P. Mehta, appearing on behalf of the assessee, has contended that the statement made in the statement of case that the assessee had made a profit from the sale of 330 shares was not correct. He wanted to produce before us a statement relating to purchases and sales of Morarjee Gokuldas Spinning and Mills' shares and he attempted to point out that out of 530 shares, 200 shares were returned to Smt. Savitridevi on March 25, 1963, and the remaining 100 shares, though originally purchased in the name of the assessee, were transferred in the name of Savitridevi but in effect that was intended to square up the loan transaction in which 300 shares were earlier taken on loan by the assessee. Thus, it was sought to be contended before us, that out of the profit from the sale of 330 shares the profit from the transfer of 100 shares in favour of Savitridevi at least should have been treated as profit from a speculative transaction since the transfer of these 100 shares was related to the earlier speculative transaction of 300 shares.
4. Now, it is not possible for us to go beyond the statement of the case, which specifically states that the profit of Rs. 38,060 came from the sale of 330 shares. It is also not possible for us to concede the request that a further statement of the case should be called for. This reference was made almost 8 years back and it is too late now to contend that any statement of fact made in the statement of case, is erroneous. It cannot be disputed that in view of the provisions of s. 73(1) of the I. T. Act, 1961, any loss, computed in respect of a speculation business carried on by the assessee, cannot be set off except against profits and gains, if any, of another speculation business. Therefore, unless it is possible for the assessee to show that the amount of Rs. 38,060 is a profit from speculation business, there was no question of setting off losses from speculation in the assessment year in question. Admittedly, in the instant case, there is actual delivery of shares sold by the assessee and purchased by the respective purchasers. Such a transaction will not fall within the definition of a speculative transaction as contemplated by s. 43(5) of the I. T. Act, 1961. Speculative transaction has been defined in that section to mean a transaction in which a contract for the purchase or sale of any commodity, including stocks and shares, is periodically or ultimately settled otherwise than by the actual delivery or transfer of the commodity or scrips. Corresponding provision in the I. T. Act, 1922, was Expln. 2 to s. 24, which has been construed by the Supreme Court in Davenport & Co. P. Ltd. v. CIT : 100ITR715(SC) . The Supreme Court has pointed out in that case that a transaction which is otherwise speculative would not be a speculative transaction within the meaning of Expln. 2, if actual delivery of the commodity or the scrips has taken place. In view of the decision in Davenport and Company's case : 100ITR715(SC) , the transaction in question in which the assessee has earned profit could not be said to be a speculative transaction as contemplated by s. 43(5) of the I. T. Act, 1961. Consequently, the question referred to us must be answered in the negative and against the assessee.
5. The assessee to pay the costs of this reference.