Lal Mahal Ltd., New Delhi vs Assessee
3.11 In the case of Shivlal Dhirajlal (supra), the facts are that the firm
of Tataram Ramjilal entered into a forward contract for purchase of 8000
tins of groundnut oil through the assessee-firm. The market price of
groundnut oil was falling and, therefore, the assessee-firm tried to cover
the transaction in order to reduce its losses. It drew hundis in favour
of Tataram Ramjilal but the hundis were dishonoured. The assessee firm
thereupon settled the transaction by selling 8000 tins of groundnut oil to
avoid further losses. No delivery was given or taken. The assessee
suffered loss of Rs. 27,035/- in the transaction. The Tribunal allowed the
claim on the ground that it related to the business of the assessee firm. The
Hon'ble Court mentioned that neither the AAC nor the Tribunal applied
their minds to the question whether the loss arose from the same
business, namely, illegal speculative business. It is mentioned that the
31 ITA No. 3804(Del)/2010
Tribunal was not right in holding that in order to claim the deduction in
income-tax assessment of the assessee-firm, it was not concerned with the
legality or illegality of the transactions and that the assessee was a
commission agent and, as such, it was responsible for the obligation or
debt of the constituents towards third party and was entitled to claim
deduction of loss of Rs. 27,035/-. Coming to the issue whether the loss
was speculation loss, it was mentioned that no evidence or material on
record is there to point out to us which would indicate that the loss
suffered in illegal speculative business could be set off against profits
of the same speculative business. Such a question will arise only when
the profit and loss arise from the same illegal business. The Tribunal was
directed to dispose off the appeal accordingly.