Section 43(5) of Income Tax Act, 1961—Business disallowance—The assessee was engaged in the business of refining of edible oil and related products. The assessee filed its return of income declaring total income at Nil. During the course of the assessment proceedings, the Assessing Officer noticed that the assessee had claimed contract settlement loss. The Assessing Officer took the view that the transactions were entered into by the assessee with various parties and those were settled without the delivery of goods by making payment of the difference of the price. According to the Assessing Officer, it was a speculative transaction. Therefore, the loss incurred due to the speculative transaction cannot be allowed as the revenue expenditure. Accordingly, the Assessing Officer made addition under Section 43(5) of the Act towards the speculation loss incurred on the purchase and sale of contracts which was claimed by the assessee as a business loss in the return of income and adjusted against the business income under Section 73 of the Act. The assessee, being dissatisfied with the assessment order, went in appeal before the CIT (A). The CIT (A) allowed the appeal of the assessee holding that the payment of damages made by the assessee represents monetary loss for the breach of contract and the settlement of the contract would not fall within the purview of Section 43(5) of the Act.The Revenue, went in appeal before the Appellate Tribunal. The Appellate Tribunal dismissed the appeal and thereby affirmed the order passed by the CIT (A). The Revenue, being dissatisfied with the impugned order passed by the Appellate Tribunal preferred an appeal before the court.
 Court held that it was difficult to accept the submission of  the Revenue that the case is one of a “speculative transaction” within the meaning of Section 43(5) of the Act. The appeal of revenue stand dismissed. --- Pr. CIT vs. RAJSHRI PACKAGERS LTD.[2020] 23 ITCD Online 93 (GUJ)