A transaction involving the purchase and sale of delivery orders without actual delivery of goods is not a speculative transaction within the meaning of Explanation 2 to Section 24 (1) of the Indian Income-tax Act, 1922, unless there is a finding that the contracts of purchase and sale were settled otherwise than by the actual delivery or transfer of the commodity.

( 1 ) THE question in this reference is as follows: whether on the facts and in the circumstances of the case the transaction which resulted in the loss of Rs. 33,736 was a speculative transaction within the meaning of explanation 2 to Section 24 (1) of the Indian Income-tax Act, 1922, and therefore the said loss should not be allowed to be set off under Section 240) of the said Act

( 2 ) THE relevant assessment year is 1959-60 and the corresponding previous year is Dewali year 2015 ending on 9th November, 1958. The respondent assessee is a partnership firm having business in paper bags, gunny bags and other commodities. During the relevant previous year it had entered into transactions in gunny bags entailing purchase and sale of delivery orders. This was done according to the prevailing practice in the Calcutta Jute trade where formal transactions in gunny, hessian etc. are carried on by the transfer of the relative delivery orders only on full payment of the purchase or sale prices. There is no actual delivery of the commodities and this happens because of the fact that the manufacturers of the Jute Goods do not normally come into contact with the shippers, namely, the exporters. It is only through chain of contracting parties for the jute goods from the manufacturers that the Shipper obtains goods from the manufacturer. The intermediaries actually affect delivery by transferring the delivery orders and the assessee is one of such intermediaries. It is an admitted fact that no delivery of goods was either given or taken by the assessee who suffered loss of Rs. 33,736 out of such transaction entered into during the relevant accounting year.

( 3 ) IN Explanation 2 to Section 24 (1) of the Indian Income-tax Act a speculative transaction means the transaction in which a contract for purchase and sale of any commodity including stock and shares is periodically or ultimately settled otherwise than by the actual delivery or transfer of the commodity or goods.

( 4 ) THE Income-tax Officer did not allow the loss claimed by the assessee on the ground that the transactions in question involved only delivery orders without actual delivery of goods and the Income-tax Officer treated the transaction to be a speculative transaction within the meaning of Explanation 2 to Section 24 (1) of the Indian Income-tax Act.

( 5 ) THE Appellate Assistant Commissioner relied on the decision of the Supreme Court in the case of Dunichand Rataria v. Bhuwalka Bros Ltd and held that the transactions entered into by the assessee were not speculative transactions within the meaning of Explanation 2 to Section 24 (1) of the Indian Income-tax Act merelv because there was no actual delivery

( 6 ) THE Appellate Tribunal expressed the view that under the Sale of Goods Act the transfer of title to goods in transit can be legally effected by the transfer of relevant documents of title and that in the present case the title to the goods was legally transferred by transferring the delivery order which enabled the holder to take delivery or possession of the goods. The Appellate Tribunal upheld the decision of the Appellate Assistant Commissioner that the transactions in the present case were governed by the principles laid down by the Supreme Court in Dunichand's case.

( 7 ) COUNSEL on behalf of the Revenue contended that in Explanation 2 to Section 24 (1) of the Indian Income-tax Act the words 'any commodity' were not confined to jute goods and contended that the decision in Dunichand's case, dealt with the legislation of jute and not of commodities in general. This distinction is without any difference Because the meaning of actual delivery is likely to apply to all goods unless such meaning is not otherwise possible. It is said that the legislative enactment which was the subject-matter in Dunichand's case was intended to curb unhealthy activities in jute goods future market and although purchase and sale of pucca delivery order on forward basis would