Judgment

GROVER, J.:- This is an appeal from a judgement of the Gujarat High Court. Originally an appeal (C. A. 1993/68) had been brought by certificate but that certificates was found to be defective as no reason were stated therein for granting it. A petition for special leave, was, therefore, filed and the same has been granted. Both the appeals shall stand disposed of by this judgement. The assessee is a registered firm and carries on the business of commission agency and general merchants. It also does forward business. It is a member of the Saurashtra Oil and Oilseeds Association Ltd., Rajkot. During the assessment year 1958-59 the corresponding accounting period being the samvat year 2013 the assessee claimed to have incurred a loss of Rs. 3,40,443/- in certain transactions entered into with different people for the supply of groundnut oil. The transactions, according to the assessee, were non-transferable ready delivery contracts entered into with non-members of the Association. It was expected that these contracts would be performed but owing to certain reasons some of the contracts could not be performed and differences had to be paid. According to the assessee it had acted as a Pucca Artia. The assessee claimed that the aforesaid loss was allowable under S. 10 (1) of the Income-tax Act, 1922 as a deduction against its other business income. The Income-tax Officer came to the conclusion that the transactions in question were hit by the provisions of the Forward Contracts (Regulation) Act, 1952 hereinafter called the Act and the Rules and Regulations of the Saurashtra Oil and Oilseeds Association Ltd. In particular the transactions were hit by the provisions of sub-ss. (1) and (4) of S. 15 of the Act and were not saved by S. 18. The losses were held to have been incurred in illegal transactions. He rejected the contention of the assessee that even on the assumption that the losses were incurred in illegal transactions they could be allowed in the computation of the income. The Income-tax Officer further held that the losses incurred in illegal business could bot be deducted from the speculative profits under S. 24 of the Indian Income-tax Act, 1922, hereinafter called the "Act of 1922". The Appellate Assistant Commissioner confirmed the order of the Income-tax Officer. In the appeal before the Tribunal it was held that the transactions in question were not the illegal contracts but were contracts which had been validly entered into under the Act and the bye-laws etc. The Tribunal thereafter proceeded to examine the question whether the losses incurred could be allowed on the assumption that the transactions were illegal. It was of the view that the assessee would be entitled to a set off under S. 24 even if the losses were incurred in illegal transactions. The Tribunal remanded the matter for a report from the Appellate Assistant Commissioner as to the applicability of the proviso to S. 24 (1) (read with the Explanation) of the Act of 1922. After the remand report was received the Tribunal gave the following two findings: (1) the contracts under consideration were all non-transferable specific delivery contracts where the intention ab initio was either to give or take delivery (2) the contracts were entered into either for the purchase or sale and later on the same quantity was either sold or purchased back by the assessee on behalf of the same constituents at the market rates prevailing at the material time i.e. they were squared up by corresponding sales or purchases as the case might be. After referring to certain decisions of High Courts the Tribunal held that the loss of Rs. 3,40,443/- had been incurred in speculative transactions. The Tribunal next proceeded to consider whether notwithstanding that the losses had been incurred in speculative transactions the assessee could set off those against the other income under S. 10 (1) of the Act of 1922. Purporting to follow the view of the majority of the High Courts,