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27. Let us now look into the problem of whether the contracts can be considered to be of the nature of ready-forward contracts. There is no doubt about the fact that the Reserve Bank of India, in its Circular No. Dir. BC.42/C/347-87 dt. 15-4-1987 advised all banks and financial institutions to refrain from entering into buy-back arrangements in Government and other approved securities except under certain conditions as laid down by the RBI. ANZ is certainly a bank and would, therefore, fall within the jurisdiction of the above circular. Shri Dastur has, however, pointed out that whereas ANZ entered into a contract for selling 5 crore units of UTI to the assessee, the buy-back arrangement was in respect of Rs. 1 crore units alone. He has furthermore argued that in a proper buy-back arrangement as meant by the Reserve Bank of India, there should be a contract to the initial sale by the bank or a financial institution and thereafter a purchase at a higher price. The higher price for purchasing back contract would compensate the gain derived by the bank/financial institutions during the period of interregunum between sale and the purchase on account of user of the sale consideration in that period. In the instant case however, the bank was required to sell the units at 14.381 and to purchase the same at 13.969. Shri Dastur thus argues that this is not a case of buy-back arrangement as considered by RBI in its circular mentioned above.

However, we note that finally both the departmental lower authorities treated the loss incurred by the assessee as merely a speculative loss or illegal in view of the circular issued by the RBI refraining the banks and financial institutions indulging in buy-back arrangement. We have already held that so far as the transactions with ANZ are concerned, the same cannot be considered as speculative transactions. From the discussions as made above, we cannot also hold that this is a case of a buy-back arrangement of all the units contracted to be sold and purchased as envisaged in the circular of the RBI. Furthermore, the sale price by the bank being higher than the purchase price is also a pointer to considering the transaction to be not exactly of buy-back nature. Again, the banks might have been advised by RBI not to indulge in buy-back arrangement. It is a moot question as to whether the assessee which is neither a bank nor a financial institution can be considered to be suffering from such restrictive instructions of RBI. In any case, whether such instructions of RBI have got the legal effect of rendering any buy-back arrangement indulged in by a bank/financial institution to an illegal transaction, is still an unanswered question. Ultimately therefore, we would hold that the transactions of the assessee with ANZ cannot be considered to be falling within the scope of buy-back arrangement as mentioned in the circular of RBI. So far as the transactions with RCFT are concerned, the said circular of the RBI would not at all apply inasmuch as neither the RCFT nor the assessee is bank or a financial institution.