Honble SINGHAL, J.—The Income-tax Appellate Tribunal Jaipur Bench, Jaipur has referred the following question of law for opinion of this Court under Section 256(1) of the Income-tax Act, 1961 arising out of its order dated 22.07.1980 for the assessment year 1974-75 :-

"Whether on the facts and in the circumstances of the case the Tribunal was justified in holding that the amount of Rs. 16,426/-is a business loss and not a speculation loss?"

(2) The brief facts of the case are that the assessee had shown a loss of Rs. 16,426/- in cotton account and the entry was passed through Nakal Bahi on the last date of the accounting year. This difference was paid on account of purchase and sale of 100 cotton bales which were through M/s. Basant Kotak & Bros. Bombay. The Income-tax Officer held that it is a speculative transaction and as such cannot be adjusted against the business income and has to be carried forward for adjustment in the subsequent years against speculation profits.

(3) An appeal was preferred against the said order where an objection was taken that this was only one forward transaction of purchase and sale of 100 cotton bales out of several transactions of business and a solitary transaction cannot be considered to be a speculation business. Reliance was placed on the decision of Andhra Pradesh High Court in the case of Addl. CIT vs. Maggaji Shermal & Another (1). The Appellate Assistant Commissioner relied upon the definition of business given under Section 2(13) of the I.T. Act, 1961 and came to the conclusion that it is not essential to constitute trade that there should be a series of transactions both of purchase and sale and a single transaction can be considered as an adventure in the nature of trade. The order of the Income-tax Officer was upheld.

(4) A second appeal was preferred to the Income-tax Appellate Tribunal which came to the conclusion that there should be more than One speculative transaction carried on by the assessee to constitute a business and reliance was placed on the Explanation to Section 28 of the Act where it was provided that "where speculative transactions carried on by the assessee are of such a nature as to constitute a business, the business shall be deemed to be distinct and separate from any other business". The Income-tax Appellate Tribunal came to the conclusion that in accordance with the meaning given under the Explanation it cannot be said that a single transaction constitute a speculative business. It was, therefore, held that it is a business loss which is allowable under Section 28.

(5) In accordance with the definition of business as given in clause 2(13) of the Act business includes "any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture. The definition is not exhaustive but is inclusive. "Business" contemplates organised efforts on the accepted commercial lines resulting into an activity.

(6) Madhya Pradesh High Court in CIT vs. Bhikam Chand Janki Lal (2), examined the definition of business and the Explanation-2 to Section 28 and came to the conclusion that the object of the said Explanation was to declare that speculation business shall be treated differently as distinct and separate from any other business. While applying the provisions of Section 13(2) of the General Clauses Act it was held that the singular would include plural and vice versa and accordingly the speculative transaction would include speculative business. It was further held that Explanation-2 has not departed its meaning to the definition of business as given in clause 2(13) of the Act and accordingly it was held that a single transaction could also be considered as a speculative transaction.

(7) Andhra Pradesh High Court in Additional CIT vs. Maggaji Shermal (supra) on the basis of the Explanation-2 to Section 28 came to the conclusion that in order to constitute a speculative business there could be more than one speculative transaction carried on by t

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