SK. AR. K. AR. SOMASUNDRAM CHETTIAR AND CO. MADURAI versus COMMISSIONER OF INCOME TAX. MADRAS

SK. AR. K. AR. SOMASUNDRAM CHETTIAR AND CO. MADURAI versus COMMISSIONER OF INCOME TAX. MADRAS

Clause (a) of the third proviso to Section 24 requires that speculative contracts must guard against loss in respect of contracts for actual delivery of goods sold; contracts of purchase are not covered. There must be a co-relation between speculative and actual delivery sale contracts. The assessee's contracts, being a mix of purchases and sales ultimately settled by paying differences, do not meet this test and are not saved by clause (a).

Parties
Appellant Assessee: SK. AR. K. AR. SOMASUNDRAM CHETTIAR AND CO., MADURAI; Respondent Revenue: COMMISSIONER OF INCOME TAX, MADRAS
Jurisdiction
India
Judgment Date
15 January 1992
Procedural Posture
Civil Appeal / Appeal by Special Leave From Madras High Court Judgment in Tax Case No. 278 of 1967
Outcome
Appeals dismissed
Legal Topics
Speculative Transactions, Set Off of Losses, Hedging Contracts, Section 24 of Income Tax Act, 1922
Income Tax Speculative Transactions Set Off of Losses Hedging Contracts Section 24 of Income Tax Act, 1922

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Parties

SK. AR. K. AR. SOMASUNDRAM CHETTIAR AND CO., MADURAI

Appellant Assessee

COMMISSIONER OF INCOME TAX, MADRAS

Respondent Revenue

Procedural Posture

Civil Appeal / Appeal by Special Leave From Madras High Court Judgment in Tax Case No. 278 of 1967

Legal Issues

  1. 1 Whether transactions resulting in losses for assessment years 1960-61 and 1961-62 were saved from being treated as speculative transactions by clause (a) of the third proviso to Section 24(1) of the Income Tax Act, 1922

Ratio Decidendi

Clause (a) of the third proviso to Section 24 requires that speculative contracts must guard against loss in respect of contracts for actual delivery of goods sold; contracts of purchase are not covered. There must be a co-relation between speculative and actual delivery sale contracts. The assessee's contracts, being a mix of purchases and sales ultimately settled by paying differences, do not meet this test and are not saved by clause (a).

Court Disposition

Appeals dismissed

Orders

  • No orders as to costs