SANKAR PRASAD MITRA, J.

( 1 ) THIS is a reference under Section 66 (1) of the Indian Income-tax Act, 1922. The assessment year is 1959-60. The corresponding accounting year was the year ended on the 31st May, 1958. The assessee is Messrs. Budge Budge Investment Co. Ltd. , which, inter alia, deals in jute and hessian. In the course of its dealings in jute and hessian during the relevant accounting year the assessee sustained a loss of Rs. 75,609. The Income-tax Officer refused to treat this loss as a business loss. He found that in no case delivery of the goods was given or taken. He, therefore, treated' the loss as a speculative loss.

( 2 ) BEFORE the Appellate Assistant Commissioner it was contended on behalf of the assessee that contracts for each transaction of purchase and sale were in the form prescribed by the Indian Jute Mills Association and these contracts were settled in each case by giving and taking delivery of pucca delivery orders. The Appellate Assistant Commissioner held that, as in each case delivery was given and taken by exchange of pucca delivery orders, though the entire amount of purchases and sales were paid and received in full in cash, in the absence of actual delivery of the goods, the contracts were speculative contracts and dismissed the appeal.

( 3 ) THE Tribunal followed the decision of this court in D. M. Wadhwana v. Commissioner of Income-tax, [1966] 61 I. T. R. 154, and dismissed the appeal.

( 4 ) THE following question of law has been referred to this court for its opinion :"whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that the loss of Rs. 75,609 suffered by the transfer or delivery of pucca delivery orders was speculation loss under the second Explanation to the proviso to Section 24 (1) of the Indian Income-tax Act, 1922 ?"

( 5 ) NOW,the relevant provisions of Section 24 (1) of the Indian Income-tax Act, 1922, are as follows:"24. Set off of loss in computing aggregate income.-- (1) Where any assessee sustains a loss of profits or gains in any year under any of the heads mentioned in Section 6, he shall be entitled to have the amount of the loss set off against his income, profits or gains under any other head in that year: provided that in computing the profits and gains chargeable under the bead ' profits and gains of business, profession or vocation ', any loss sustained in speculative transactions which are in the nature of a business shall not be taken into account except to the extent of the amount of profits and gains, if any, in any other business consisting of speculative transactions. . . Explanation 1.--Where the speculative transactions carried on are of such a nature as to constitute a business, the business shall be deemed to be distinct and separate from any other business. Explanation 2.--A speculative transaction means a transaction in which a contract for purchase and 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. . . "

( 6 ) THE section clearly stipulates that, in order to be a speculative transaction, the contract must be either periodically or ultimately settled. Secondly, the settlement so effected must be otherwise than by actual delivery or transfer.

( 7 ) MR. Debi Pal, learned counsel for the assessee, contends that, on the facts of this case, the Tribunal should not have followed the decision in Wadhwana's case. In that case, under certain contracts, the assessee had to sell to, and purchase from, the same party the same quantity of the specified commodity of which delivery had to be effected by both on the same day. The parties to these contracts exchanged pucca delivery orders which authorised the assessee and the other party respectively to take delivery of the stipulated number of bales from the mills concerned and drew bills on each other pursuant to the contracts. Debit and cre

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