K.S. Paripoornan, J.
1. The Income-tax Appellate Tribunal has referred the following two questions of law for the decision of this court at the instance of the Revenue :
'R. A. No. 25 (Coch) of 1983 :
Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the amounts paid or settled by way of damages after the breach of contracts entered into by the assessee should not be treated as losses arising out of speculative transactions as defined in Section 43(5) of the Income-tax Act, 1961 R. A. No. 26 (Coch) of 1983 : Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in holding that the assessee was an industrial company in terms of Section 2(7)(c) of the Finance (No. 2) Act, 1977 ?'
2. The respondent is an assessee to income-tax. It is a dealer in cashew. It also exports cashew kernels. It could not fulfil the contracts entered into by it for exports. The respondent/assessee has to pay damages. The original claim was for Rs. 8,47,406. At the stage of the Tribunal, the amount swelled up to Rs. 12,07,677. The claim was disallowed by, the Income-tax Officer. It was affirmed in first appeal by the Commissioner of Income-tax (Appeals). In second appeal, the Appellate Tribunal, following the decisions of the Calcutta, Delhi and Karnataka High Courts, held that the settlement in pursuance of which damages were payable by the respondent/assessee would not amount to speculative loss. The Tribunal did not follow the decision of the Madras High Court to the contrary. On this basis, appropriate directions were given to the Income-tax Officer to verify certain details and afford relief to the assessee.
3. Another question which arose for consideration was whether the assessee could be called an industrial company in terms of Section 2(7)(c) of the Finance (No. 2) Act of 1977. The Appellate Tribunal followed its earlier decision in I. T. A. No. 326 (Coch) of 1977-78 dated March 31, 1980, and held that the said decision would hold good for this year also, since the nature of the operations carried on by the assessee-company are similar. The plea of the assessee was upheld in that behalf. Aggrieved by the order passed by the Appellate Tribunal dated December 8, 1982, on motion by the Revenue, the Income-tax Appellate Tribunal has referred the above two questions of law for the decision of this court.
4. We heard counsel for the Revenue as also counsel for the assessee. For the first question, the Appellate Tribunal relied on the decision of the Calcutta High Court in CIT v. Pioneer Trading Co. P. Ltd. : [1968]70ITR347(Cal) and similar cases. The said decision was approved by the Supreme Court in CIT v. Shantilal. P. Ltd. : [1983]144ITR57(SC) .
5. In the light of the decision of the Supreme Court, the conclusion of the Appellate Tribunal, that the amounts paid or settled by way of damages, after the breach of contracts entered into by the assessee, should not be treated as losses arising Cut of speculative transactions as defined in Section 43(5) of the Income-tax Act, is justified and valid in law.
6. We, therefore, answer the question referred to as in R. A. No. 25 (Coch) of 1983 in the affirmative, against the Revenue and in favour of the assessee.
7. The only other question is with regard to R. A. No. 26 (Coch.) of 1983. The Appellate Tribunal relied on its earlier decision in I. T. A. No. 326 (Coch.) of 1977-78 dated 31-3-1980 for the assessment year 1972-73. The said decision came up before this court in I. T. R. No, 375 of 1980 ( CIT v. Rajmohan Cashews (P.) Ltd. : [1990]185ITR472(Ker) ). A Bench of this court, by judgment dated February 25, 1986, held that the respondent-assessee is an industrial company within the meaning of Section 2(6)(c) of the Finance Act, 1972. The Appellate Tribunal has also found that the nature of the operations carried on by the assessee-company is similar for this year also.
8. In the light of the earlier decision of this court in I. T. R. No. 375 of 1980 (CIT v. Rajmohan Cashews (P.) Ltd. : [1990]185ITR472(Ker) ), in the case of the very same assessee, we are of the view that the Appellate Tribunal was justified in holding that the respondent-assessee is an industrial company in terms of Section 2(7)(c) of the Finance (No. 2) Act, 1977 (Act No. 29 of 1977).
9. We, therefore, answer the question referred to us in R. A. No. 26 (Goch) of 1983, in the affirmative, against the Revenue and in favour of the assessee.
10. A copy of this judgment, under the seal of this court and the signature of the Registrar, shall be forwarded to the Income-tax Appellate Tribunal, Cochin Bench.