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Commissioner of Income-tax Vs. K.L. Jhunjhunwalla - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Case NumberIncome-tax Reference No. 394 of 1970
Judge
Reported in[1983]139ITR371(Cal)
ActsIncome Tax Act, 1961 - Section 256(1)
AppellantCommissioner of Income-tax
RespondentK.L. Jhunjhunwalla
Appellant AdvocateA.K. Sengupta and ;P. Majumdar, Advs.
Respondent AdvocateP.K. Pal and ;R.N. Dutta, Advs.
Excerpt:
- .....1964-65. the assessee was carrying on the business of brokerage and purchase and sale of jute and hessian goods. the ito found that both the purchase and sale transactions in the business of jute and hessian goods were settled otherwise than by actual delivery. he, therefore, treated the business of purchase and sale of jute and hessian goods as speculation business. the ito, however, further held that the income from brokerage on the purchase and sale of jute and hessian goods could not be treated as speculation income, since it was a business apart from speculation in jute and hessian goods. the result was that the net speculation loss of rs. 340 was carried forward and not set off against the net brokerage income of rs. 43,982.2. against the order of the ito, the assessee went up in.....
Judgment:

Sabyasachi Mukharji, J.

1. The assessee is an individual and the reference relates to the assessment year 1964-65. The assessee was carrying on the business of brokerage and purchase and sale of jute and hessian goods. The ITO found that both the purchase and sale transactions in the business of jute and hessian goods were settled otherwise than by actual delivery. He, therefore, treated the business of purchase and sale of jute and hessian goods as speculation business. The ITO, however, further held that the income from brokerage on the purchase and sale of jute and hessian goods could not be treated as speculation income, since it was a business apart from speculation in jute and hessian goods. The result was that the net speculation loss of Rs. 340 was carried forward and not set off against the net brokerage income of Rs. 43,982.

2. Against the order of the ITO, the assessee went up in appeal to the AAC who held that since the brokerage was received and ,paid on purchases and sales of jute and hessian goods, which were settled otherwise than by actual delivery, it was part and parcel of the same business and, therefore, the receipts and payments of brokerage should also be treated as part of the speculation business.

3. Being aggrieved with the order of the AAC, the Department filed an appeal before the Appellate Tribunal. The Appellate Tribunal, following the order in the case of Mr. Bilas Rai & Co., held that the brokerage on purchase and sale of hessian goods should also be treated as speculation business and, therefore, confirmed the order of the AAC on this point.

4. Upon this fact, the following question of law was referred to this court under Section 256(1) of the I.T. Act, 1961 :

'Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that the brokerage on the purchase and sale of the assessee's speculative business of purchase and sale of pucca delivery orders and mate's receipts, was of a speculative nature ?'

5. We are inclined to agree with the view of the Tribunal. But the Supreme Court in the case of CIT v. Pangal Vittal Nayak & Co. Pvt. Ltd. : [1969]74ITR754(SC) , where the assessee, who was a member of an association for speculation in coconut oil, had also speculated on its own, and the assessee also received orders from its constituents, who were not members of the association, to speculate on their behalf, the procedure for those transactions being, as mentioned in the said judgment, the Supreme Court noticed, that, in each of the transactions, the assessee had received commission from the parties on whose behalf the transactions were done. The assessee had claimed to set off such commission against the speculation losses. It was held by the Supreme Court that the commission received by the assessee could not be set off against the speculation losses, because there was no element of speculation whatever in the commission income received by the assessee ; the commission was independent of any fluctuation in the market and no risk was involved in earning it. The commission had to be treated not as a profit from the speculation business but as profit from the business as brokerage and the assessee was not entitled to have that commission receipt assessed under the head 'Speculation business'. In view of the said decision of the Supreme Court, the question must be answered in the negative and in the favour of the Revenue.

6. Each party will pay and bear its own costs.

7. Learned advocate for the assessee prays for oral leave for certificate to appeal to the Supreme Court. We cannot entertain such application and grant such leave. We dismiss the prayer;

8. This order should be drawn up separately and expeditiously.

Sudhindra Mohan Guha, J.

9. I agree.


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