Sikri, J.— This appeal by special leave is directed against the judgment of the High Court of Rajasthan, rejecting the application under Section 66(2) of the Income Tax Act, filed by the appellant.
2. For the assessment for 1958-59, the Income Tax Officer disallowed loss of Rs 45,676 incurred by the respondent, M/s Shri Govind Commercial Co. (P) Ltd., Jaipur, hereinafter referred to as the assessee, on the ground that this loss was incurred in speculative transactions on a large scale in hessian and gunny bags. It is noted in the order that “Shri M.L Sharma admitted that the transactions were of speculative nature since the deliveries were not taken.” Apparently this admission was not understood properly by the Income Tax Officer because the assessee filed an appeal before the Appellate Assistant Commissioner and contended that the admission was only to the effect that delivery of goods was not taken. On the merits, it was contended before the Appellate Assistant Commissioner that the assessee did not take physical delivery of the goods but received the delivery orders according to the terms of the contract for purchases and similarly it made over the delivery orders as per the terms of the sale contracts. It was further argued that this receiving and making over of delivery orders was tantamount to “actual delivery or transfer of the commodity or scripts” within the meaning of Explanation 2 to Section 24(1). The assessee relied on the decision of this Court in Duni Chand Rataria v. Bhuwalka Brothers Ltd. (1955) 1 SCR 1071. The appellate Assistant Commissioner, however, rejected the contentions of the assessee and distinguishing the decision of this Court in Duni Chand Rataria case (1955) 1 SCR 1071 upheld the order of the Income Tax Officer. The Appellate Tribunal, on appeal, accepted the contentions and held that the decision of the Supreme Court governed the case, and that on the facts it was satisfied that this was not a case where the transactions were settled by payment of differences. It found that payments had been made for full value of the goods purchased, and, therefore, the transactions could not be regarded as speculative transactions. The Appellate Tribunal further held that the term “scripts” occurring in Explanation 2 to Section 24(1) could refer to scripts pertaining to any commodity and there was no warrant for saying that it should refer to stocks and shares alone. This was with reference to the argument of the assessee that Explanation 2 was not confined to actual delivery or transfer of commodity but spoke of delivery or transfer of scripts also.
3. The Commissioner of Income Tax thereupon filed an application under Section 66(1), raising the following two questions:
“(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that there was actual delivery of the commodity within the meaning of Explanation 2 to Section 24(1) of the Indian Income Tax Act, 1922; and
(2) Whether on the facts and in the circumstances of the case, the term ‘scripts' in Explanation 2 to Section 24(1) of the Indian Income Tax Act, 1922, can refer to scripts pertaining to any commodity or to stocks and shares alone.”
4. The Appellate Tribunal rejected the application on the ground that the questions raised by the Commissioner of Income Tax were already well-settled by the decision of this Court in Duni Chand Rataria case AIR 1955 Supreme Court 182. The Commissioner of Income Tax then filed an application under Section 66 (2 of the Income Tax Act before the High Court. The High Court, in a short order, dismissed the application. The High Court observed as fallows:
“We have heard learned counsel and are inclined to the view taken by the Tribunal that the first question which is sought to raised is covered by the principle of the decision of Lordships of the Supreme Court in Duni Chand v. Bhuwalka Brothers Ltd. AIR 1955 Supreme Court 182. In that view of the matter, the second question does not arise at all.”
5. The learned Solicitor General, who appears on behalf of the Revenue contends that the High Court should not have rejected this application under Section 66(2) because the questions referred to above were arguable questions of law. He says that the first question is not concluded by the decision of this Court in Duni Chand Rataria case AIR 1955 Supreme Court 182. He further contends that the Calcutta High Court has in an unreported judgment in D.M. Wadhwana v. CIT distinguished the Supreme Court decision in Duni Chand Rataria case AIR 1955 Supreme Court 182 and has taken the view that the words “actual delivery” in Explanation 2 to Section 24(1) do not only mean physical delivery. We need not express an opinion at this stage on the soundness of the view of the Appellate Tribunal in the present case, or the view taken by the Calcutta High Court in the above unreported case. We are of the opinion that fairly arguable questions of law arise and the High Court should have directed the Appellate Tribunal to the state case and refer it to the High Court.
6. Accordingly the appeal is accepted and we direct the Appellate Tribunal to state the case and refer it to the High Court. In the circumstances of the case there will be no order as to costs in this Court.