1. This is an appeal filed by Laxminarayan Trading Co., Adoni, against the order of the Commissioner (Appeals) for the assessment year 1970-71.
2. The assessee is a partnership firm doing business in oil. The dispute initially related to a claim of loss of Rs. 54,268 which was disallowed by the ITO as speculation loss. In the first appeal, the claim was initially allowed by the first appellate authority but latbr the issue was referred to the ITO for dealing with it afresh purported under Section 154 of the Income-tax Act, 1961 ('the Act'). On the assessee's second appeal, the Tribunal confirmed the order restoring the matter subject to its direction that certain observations made by the AAC claimed to be adverse to the assessee need not inhibit the ITO from coming to his own conclusion on facts. The ITO accepted the assessee's claim to the extent of Rs. 8,501 and repeated his earlier stand as regards balance of Rs. 45,677. The Commissioner (Appeals) found that railway receipts were transferred in this case. Transfer of railway receipt, in his view, did not amount to actual delivery. In absence of actual delivery, he concluded that the transactions were of speculative nature within the meaning of Section 43(5) of the Act. The assessee is in second appeal. The learned counsel for the assessee repeated the stand before the authorities below, while the learned departmental representative relied upon their orders.
3. We have carefully considered the records as well as arguments. There are seven transactions relating to the loss of Rs. 45,677. All the transactions now under consideration are similar on facts. It is, therefore, sufficient if one of the transactions is considered in detail. We will take up the same transaction considered by the first appellate authority in order to ascertain the relevant facts.
4. The assessee had entered into a written contract on 9-10-1969 for purchase from Shankerlal Lohoti Oil Mills, Gulbarga of one tank (18 to 20.8 tonnes) of groundnut oil (Expeller drawn--2 per cent FFA guarantee) at Rs. 436 per quintal loose including central sales tax Bilticut Raichur freight basis. Delivery was to be made between 25-10-1969 to 3-11-1969. Despatch was guaranteed by that date after buyer's option. It was also stipulated therein that the assessee was to give C Form to suppliers who, in turn, was obliged to give E Form, if necessary. It was further stipulated that weighment and sampling should be done in the presence of buyer s representative only. The contract was entered through Ramkishan Rathi & Co., brokers at Hyderabad. In pursuance of this contract, the sellers booked one tank (19,300 kilos--net weight) groundnut oil by Railway in RR No. AO 66960 E-Raichur, freight paid to Dalmianagar siding in wagon ER TV No. 98642 on 2-11-1969. The seller also made out an invoice regarding the goods covered by the railway receipt on 4-11-1969 at Rs. 436 per quintal including CST subject to production of C Form. The assessee honoured the invoice, issued C Form (No. A/7-470243) and obtained E-I Form (No.61654) so as to complete the sale. After obtaining the railway receipt, it also duly endorsed the same to Prakash Brothers in pursuance of its own sale hereinafter detailed and invoice dated 4-11-1969. The sale to Prakash Brothers was in pursuance of a similar written contract on 27-10-1969 through the same brokers. Due to a fall in price meanwhile, the agreed price on 27-10-1969 was Rs. 335 per quintal. The assessee's invoice refers to the number of same tanker covered by the railway receipt, the number of which has also been mentioned in the invoice made out by the assessee on 4-11-1969. Prakash Brothers also issued a C Form of their own (No. A/10-405765) against the assessees E-1I Form (No. 119844). Incidentally, Prakash Brothers had in turn sold the goods to Rohtas Industries Ltd. and the railway receipt was endorsed on purchaser's request in their favour. Accounts were settled on this basis. It is on these facts, we have to consider whether the transaction is a speculative one or not in the light of the definition of 'speculative transaction' in Section 43(5), which reads as under : 'speculative transaction' means 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. . . .
5. In the assessee's case, if the assessee had transferred its right to future delivery in the contract with Lahoti Oil Mills, the transaction would have certainly been a speculative one within the meaning of Section 43(3), as in that case, there is no delivery or transfer of ascertained goods. No doubt, the assessee had agreed to sell a tanker of oil to be delivered during the same period as purchased by him. But this was an independent contract and not merely a transfer of rights in its contract with the oil mill. The assessee's contract with oil mill contemplated actual delivery as is evident from the inspection clause and C Form (under the Central Sales Tax Act) condition. Railway receipt was delivered to the assessee along with an invoice which was settled by payment by hundi. The moment that goods were consigned by rail, a railway receipt obtained and an invoice made out with reference to that railway receipt, there is a performance of the contract between the assessee and the oil mill. The goods have been ascertained and appropriated to the contract. The invoice, railway receipt, issue of C Form by the assessee and its obtaining E-I from the seller, all indicates that ownership in the goods covered by the railway receipt had passed to the assessee. Though there has yet been no physical delivery to the assessee at this stage, there has been transfer of the commodity in question within the meaning of Section 43(5) which not only contemplates actual delivery but also 'transfer'. It is also not possible to say that there has not been any actual delivery in such cases. When there is actual delivery of the goods to Rohtas Industries Ltd., there has been physical delivery in respect of each prior sale covered by the railway receipt. As for the assessee's sale to Prakash Brothers, the position is identical. There had been 'transfer' when the invoice is made and railway receipt is passed on in pursuance of the contract. There is a transfer of title over the physically ascertained goods consequent on the assessee's performance of the contract. This is good enough to take the assessee's sale out of sction 43(5). As noticed earlier, there is also subsequent actual delivery to ultimate buyer and such actual physical delivery constitutes actual delivery in respect of all preceding contracts relating to the railway receipt. Sales Tax Law recognises more than one sale in respect of goods covered by the railway receipt as is evidenced from the specific exemption granted to a second or subsequent sale under the Central Sales Tax Act subject to production of C Form by purchaser and E-I/E-II Forms by sellers certifying the fact of registration as a dealer and the details of transaction. Hence, it is wrong to assume, as had been done by the first appellate authority, that there could be only one delivery, i.e., the delivery to the ultimate buyer and that all prior transactions on the same railway receipt are 'speculative' transactions. In the facts and circumstances of the assessee's case, it is, therefore, not possible to say that there has been neither 'actual delivery' nor 'transfer' so as to make the transactions 'speculative' within the meaning of the statute especially since there has certainly been transfer of rights over specific goods at every stage.
6. We have, however, to deal with the 'legal' objection of the learned Commissioner (Appeals). He has likened the railway receipt with pucca delivery orders since the latter is also recognised as a document of title subject to certain conditions like commercial usage under Section 2(4) of the Sale of Goods Act, 1930. On this comparison, it is concluded by him that the Supreme Court decision in the case of Davenport & Co. (P.) Ltd. v. CIT  100 ITR 715 will apply as it had held that transfer of pucca delivery orders issued by jute mills did not constitute delivery so as to take the transaction out of Section 43(5). But as pointed out by the learned counsel, the pucca delivery order in that case was not for delivery of specific or ascertained goods. There had yet been no appropriation. The different line of business of the assessee, the absence of godown, etc., also indicated that there was no intention to take delivery. Facts in the assessee's case are different. The assessee is in the same line. The goods had been ascertained. Invoices were made out. Formalities under the Central Sales Tax Act have been observed. The most significant detail, however, is that there were ascertained goods appropriated to the contract. Whatever might be the similarities as between a pucca delivery order issued by jute mills and a railway receipt, there is a basic difference that the pucca delivery order, though transferable by commercial usage, was an order to deliver future goods of specified description and not specific goods as covered by railway receipt. The learned first appellate authority has also adverted to some decisions to show that endorsement of railway receipt need not always mean that the title to goods had passed to the buyer. It is true that railway receipt is primarily a document recognising the endorsee's right to take delivery. Ownership may depend upon other terms of the contract.
But in the context of test for ascertaining whether there has been delivery or not, it is this right to take delivery that is of prime importance. Even othewise, in the facts of the case before us, the contract is for despatch of the goods--bilticut Raichur (sic). Once the bilticut (railway receipt) is delivered, the seller's part of the contract stands performed and there is no material for holding that even ownership has not passed to the assessee-buyer. The position is the same as between the assessee and his buyer after endorsement/delivery of railway receipt. We are unable to accept the proposition of the learned first appellate authority that there is neither appropriation nor ascertainment when there is no physical delivery to the immediate buyer. Since he has sought to support his proposition by taking some observations from cases out of context and where facts are dissimilar, we do not consider it necessary to disprove this proposition which is, pritna facie, wrong. Besides, we have taken the view that there is constructive delivery in this case. It is sufficient for the purposes of this case to show that though the initial contracts for both purchase and sale were of future goods, they were performed by actual appropriation of specific goods to the contract, consigning them to the railways and sending the railway receipt to the buyer to enable the buyer to take delivery (either for himself or for another). There are also other ingredients of actual physical sale so that the transactions could not be treated as speculative either in the broader commercial sense or in the narrower sense for purposes of income-tax under Section 43(5).
7. We are, therefore, of the view that the original order of the first appellate authority allowing the loss in view of Raghunath Prasad Poddar v. CIT  90 ITR 140 (SC) was correct and the subsequent rectification order by him and the order of the Commissioner (Appeals) purportedly following the decision of Davenport & Co. (P.) Ltd.'s case (supra) is wrong as the facts of the latter case are easily distinguishable. Besides on facts found by us in paragraph 4 supra, we hold that the transactions are not 'speculative' and that the assessee is entitled to the loss of Rs. 45,677 as a normal business loss.