Ranganathan, J.:— After hearing both the counsel we have come to the conclusion that the question referred to us is purely academic and having regard to the findings of the Tribunal, any answer given by us to that question will have no impact on the income-tax assessment in question. We have, therefore, come to the conclusion that we should decline to answer the reference.

2. Briefly stated the facts are that the assessee, R.D Ram Nath & Co., was a firm engaged in the business of export of brassware and handicrafts. The accounting year with which we are concerned is the period from April 1, 1964, to November 10, 1964. Some time during this accounting year (the exact date is not available), it appears that the market rate of zinc, which the assessee was entitled to import under a licence available to it, was Rs. 2 to Rs. 2.10 per kg. At that time the assessee entered into a forward contract of sale with two Moradabad parties, M/s. Hansraj Dharam Pal Jain and M/s. Standard Metal industries. By these contracts the assessee sold 20,000 kgs. of zinc to each of the parties to Rs. 2.25 per kg., the delivery to be effected in October, 1964. By the time the assessee obtained the imports and was in a position to give delivery, the price of zinc had risen to Rs. 3 per kg. The assessee, therefore, decided not to honour its transaction with the Moradabad parties but instead to sell the zinc to certain Bombay parties, paying compensation to the Moradabad parties for the failure to effect delivery as per the earlier agreement. This, the assessee was able to do and it sold 40,000 kgs. of zinc at Bombay for Rs. 1,17,000 and paid a compensation of Rs. 30,000 to the two Moradabad parties. At first it may appear that since the assessee should have sold the zinc to the Moradabad parties for Rs. 90,000 and since it ultimately sold the zinc only for Rs. 1,17,000 it was not a profitable transaction to agree to pay a difference of Rs. 30,000 to the Moradabad parties but actually the zinc was imported at Bombay and apart from the actual sale price, the assessee was able to save substantial amounts by way of transport and packing charges. While completing the assessment for 1965-66, the ITO disallowed the sum of Rs. 30,000 as in his opinion the whole version of a contract with the Moradabad parties and payment of compensation was not believable. However, on appeal, the AAC accepted the assessee's claim. He referred to the decisions in CIT v. Pioneer Trading Co. P. Ltd., [1968] 70 ITR 347 (Cal) and Raghunarayan Rice Mills v. CIT, [1970] 75 ITR 682 (Orissa). He held that the ITO was not justified in disallowing the compensation paid to the Moradabad parties.

3. The ITO filed an appeal to the Appellate Tribunal and contended that the sum of Rs. 30,000 should not have been allowed because it was a loss in speculative transactions, i.e, transactions which had been settled otherwise than by actual delivery. On the other hand on behalf of the assessee reliance was placed on the decisions referred to by the AAC. The Tribunal disposed of the matter by para. 3 of its order.

“We do not find any ground for interfering with the order of the Appellate Assistant Commissioner in this regard. The genuineness of the transactions is no longer in doubt. According to the confirmatory letter issued by Hans Raj Dharam Pal Jain, the amount of Rs. 15,000 was paid long after the delivery was due. Even the liability was accepted in November, 1964, whereas according to the assessee the delivery was due in October. The letter from the other party is no doubt vague but having accepted its genuineness, there was no reason to doubt that the nature of the transaction in both the cases was the same. There was, therefore, clearly a breach before the payment was made and the payment came within the ratio of the Calcutta High Court in Pioneer Trading Co., [1968] 70 ITR 347. Moreover, in terms of Explanation 2 to s. 28, only if speculative transactions carried on by an assessee are of such a nature as to constitute a business, the business could be deemed to be distinct and separate from any other business. It was not enough for the Department to show that the transactions arose from the original business of the assessee. It was necessary for it to show that the transactions which it alleged to be speculative were of such a nature as to constitute a business. There must be organisation, there must be continuity and there must be a sort of regularity about the transactions put through by the assessee before the speculative transactions can be said to constitute a business. In case of stray transactions like transactions in consideration before us it cannot be suggested that they constituted a business. There were deviations from the assessee's regular business but they did not by themselves constitute a business. It was not assessee's practice to enter into such transactions which it was its intention from the beginning to settle after breach or which it had become its normal practice to settle by payment of difference. These were stray transactions which the assessee closed in a particular manner due to exigencies arising out of its old business. But that did not convert these stray transactions into a separate and distinct business. On this ground also the loss was clearly allowable.”

4. From the order of the Appellate Tribunal a reference to this court was sought by the Commissioner. In his application for reference, the Commissioner wanted three questions to be referred to this court:

“(1) Whether, on the facts and in the circumstances of the case, there was any material for the Tribunal to hold that there was a valid transaction between the assessee and the two parties of Moradabad for supply of zinc?

(2) If the answer to the above question is in the affirmative, then whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the transactions entered into by the assessee with the two Moradabad parties were not transactions of speculative nature?

(3) Whether, on the facts and in the circumstances of the case, the Tribunal was legally correct in deleting the disallowance of Rs. 30,000 on account of compensation?”

5. The Tribunal, however, was of the opinion that only the following question arose out of its order and has referred the same for our opinion:

“Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the transactions entered into by the assessee with the two Moradabad parties were not transactions of speculative nature and thereby whether the Tribunal was legally correct in deleting the disallowance of Rs. 30,000 on account of compensation paid by the assessee?”

6. From what has been stated above it will be seen that the Tribunal allowed the assessee's claim on two grounds. In the first instance the Tribunal held that the sum of Rs. 30,000 was not a loss incurred in a speculative transaction but was a payment made by way of a breach of contract. On this aspect of the case the Tribunal followed the decision of the Calcutta High Court in the case of Pioneer Trading Co., [1968] 70 ITR 347 (Cal), earlier referred to, which we now find has been followed in a large number of cases.

“Daulatram Rawatmull v. CIT, [1970] 78 ITR 503 (Cal), Raghunarayan Rice Mills v. CIT, [1970] 75 ITR 682 (Orissa), Bhandari Rajmal Kushalraj v. CIT, [1974] 96 ITR 401 (Mys), CIT v. Indian Commercial Co. P. Ltd., [1977] 106 ITR 465 (Bom), CIT v. Arun General Industries Ltd., [1977] 110 ITR 286 (Cal), CIT v. Ramjeewan Sarawgee & Sons, [1977] 107 ITR 845 (Cal), Thakurlal Shivprakash Poddar v. CIT, [1979] 116 ITR 190 (MP) and CIT v. Anglo-Indian Jute Mills Co. Ltd., [1980] 124 ITR 384 (Cal). The Tribunal, however, did not stop with this. It also rested its conclusion on a second alternative ground which proceeded on the assumption that the assessee had entered into a transaction of a speculative nature. The Tribunal pointed out that even assuming that the transactions with the Moradabad parties amounted to speculative transactions they could not be treated as forming a distinct business resulting in the loss in respect thereof, not being set off against the normal profits of the assessee's business only if the terms of Explanation 2 to s. 28 were fulfilled. This Explanation reads as follows:

“Where speculative transactions carried on by an assessee are of such a nature as to constitute a business, the business (hereinafter referred to as ‘speculation business’) shall be deemed to be distinct and separate from any other business.”

7. Referring to the above Explanation the Tribunal has pointed out that the transactions put through by the assessee could not be said to be of such a nature as to constitute a business, as the main ingredients of business, namely, organisation, continuity and regularity were absent.

8. We find that the second ground on which the Tribunal has rested its conclusion has not been challenged by the Commissioner. The question referred to us has already been set out and as we understand it that question only challenges the findings of the Tribunal that the transaction entered into by the assessee with the Moradabad parties were not speculative transactions; the second part of the question referred to us is only consequential to the first part and raises the issue whether, the conclusion of the Tribunal as to the nature of the transaction being erroneous, the Tribunal could be said to be correct in deleting the disallowance made by the ITO. On behalf of the Department it was contended that the question was wide enough to take in all aspects of the decision of the Tribunal. We a???e unable to agree. Nor do the questions on which the Commissioner sought a reference advert to this aspect. The first question is of no direct relevance. The second question canvasses the finding that the transactions were speculative transactions and the third question challenges the correctness of the finding of the Tribunal that the compensation paid for breach of contract could not be treated as a speculative loss following the decision in Pioneer Trading Company's case, [1968] 70 ITR 347 (Cal). The second aspect dealt with by the Tribunal was based on a finding of fact that the transactions were not of such a nature as to constitute a business. It is now well settled that such clear findings must be challenged by raising a specific question in regard to the maintainability of the Tribunal's conclusion thereof. There is no challenge to this finding of the Tribunal and there is no question suggesting that this finding of the Tribunal was erroneous in law or based on no material. In these circumstances, we are unable to read the reference as comprehending also the second aspect on which the Tribunal disposed of the appeal before it. This results in the following position that even if we agree with the Department and hold that the transactions in question were speculative transactions, that will not have any practical impact on the assessment. The Department will not be able to succeed in restoring the disallowance of Rs. 30,000 unless the second ground of the decision of the Tribunal is also set aside. As to that unfortunately no reference has been made to us. In these circumstances, the reference before us is one of a purely academic nature. We, therefore, express no opinion on the merits of either of the issues that really arise in this case: (1) whether in a case of this type a speculative transaction can be said to be involved, and

(2) whether the transactions in question were rightly held to be speculative transactions not in the nature of a business.

9. The reference is, therefore, returned unanswered. There will be no order as to costs.