COMMISSIONER OF INCOME-TAXBOMBAY CITY-III, BOMBAY vs SHANTILAL PRIVATE LlMITED BOMBAY

The Supreme Court held that a transaction involving a breach of contract, where damages are awarded as compensation by an arbitration award, does not qualify as a speculative transaction under Section 43(5) of the Income-tax Act, 1961. The Court affirmed the Appellate Tribunal's ruling that the loss incurred by the respondent assessee was a business loss, not speculative, as it arose from a breach rather than a settlement of the contract. The judgment overruled the precedent set in R. Chinnaswami Chettiar v. Commissioner of Income-Tax, Madras, 96 ITR 353.