DIPAK KUMAR SEN, J. ( 1 ) THE material facts and proceedings leading up to the above references are, inter alia, that Messrs Hoare Miller and Co. Ltd. , Calcutta, the assessee, is a company. The assessee is a leading exporter of jute products. In its business, the assessee at the material time used to issue firm offers by cables to its foreign customers for supply of jute products by way of exports. These offers were kept open for 24 to 72 hours and on receipt of the acceptance by the foreign customers, the assessee exported the jute products. ( 2 ) AGAINST the offers made to its foreign customers, the assessee used to enter into purchase agreements with local suppliers in order to guard itself against future price fluctuations in the jute market. In most of the cases, the assessee used to enter into a purchase transaction locally against each export offer abroad. ( 3 ) THE firm offers issued by the assessee to its foreign customers abroad were accepted in or about 80% of cases and the balance of about 20% did not materialise in any concluded contract. ( 4 ) IN the assessment year 1964-65, the accounting period ending on December 31, 1963, the assessee suffered a loss of Rs. 86,238 arising out of its local purchase transactions as the assessee did not receive acceptance from its foreign customers of a part of its firm offers within the stipulated time. The assessee claimed deduction of the said Rs. 86,238 as " hedging loss " in its return of income. ( 5 ) THE Income-tax Officer held that there was no evidence in support of the assessee's claim and treated the local purchase transactions as speculative transactions. The claim of the assessee was disallowed. ( 6 ) BEING aggrieved, the assessee preferred an appeal to the Appellate Assistant Commissioner. ( 7 ) THE Appellate Assistant Commissioner found that in respect of about 15% of the appellant's firm offers cabled abroad, the contracts did not eventually materialise. He also found that it was the normal business practice of the assessee that the local transactions for purchase would be entered into, at the same time when the assessee made an offer for export abroad without the same being concluded. As the foreign sales did not materialise, the assessee had to conclude the local transactions by payment of differences. He also found that it was the normal business practice of the assessee that the local transactions for purchase would be entered into, at the same time when the assessee made an offer for export abroad without the same being concluded. As the foreign sales did not materialise, the assessee had to conclude the local transactions by payment of differences. It was also found that in the assessment, the profits of such settlements have been taxed but the losses have been disallowed. ( 8 ) THE Appellate Assistant Commissioner considered and construed Section 43 (5) of the Income-tax Act, 1961, as also the meaning of the expression " hedge ". He found on the facts that the local purchase transactions of the assessee were hedging transactions and allowed the appeal of the assessee. ( 9 ) BEING aggrieved, the Revenue went up in appeal before the Income-tax Appellate Tribunal. It was contended before the Tribunal on behalf of the Revenue that inasmuch as the assessee entered into local purchase transactions immediately after sending offers of sale to its foreign customers, the foreign transactions which were intended to be hedged by the local purchase transactions did not amount to contracts for actual delivery of goods, and, therefore, the assessee could not claim benefit under the proviso to Section 43 (5) of the Income-tax Act, 1961. It was contended further that the assessee had to establish that the contracts entered into with its foreign customers were for actual delivery of the goods. ( 10 ) IT was contended on behalf of the assessee that the foreign transactions of sale entered into by the assessee with its foreign customers were nothing but contracts for actual delivery of goods, inasmuch as by making the firm offers to its foreign customers, the assessee bound itself to supply the goods, if the same were accepted by its foreign customers within the stipulated time. ( 11 ) ON a consideration of the facts and circumstances of the case, the Tribunal held that the transactions entered into by the assessee with its foreign customers could not be held to be speculative. The Tribunal held that once the assessee made firm offers to its foreign customers, it fulfilled its part of the contract for actual delivery of goods. If the foreign customers accepted such offers, the assessee would be required to export the goods to such customers. The Tribunal held that once the assessee made firm offers to its foreign customers, it fulfilled its part of the contract for actual delivery of goods. If the foreign customers accepted such offers, the assessee would be required to export the goods to such customers. But if the assessee did not receive any acceptance from its foreign customers, the local purchase contracts had to be concluded. The Tribunal held that there was no reason why the transactions entered into between the assessee and its foreign customers could not be held to be for " actual delivery of goods ". The Tribunal upheld the order of the Appellate Assistant Commissioner and rejected the appeal of the Revenue. ( 12 ) ON an application of the Revenue under Section 256 (1) of the Income-tax Act, 1961, the following question has been referred, as a question of law arising out of the order of the Tribunal, for the opinion of this court : " Whether, on the facts and in the circumstances of the case, the loss of Rs. 86,238 was rightly allowed as non-speculative loss ? " ( 13 ) THE above question is the subject-matter of Income-tax Reference No. 165 of 1976. ( 14 ) ON a further application of the Revenue under Section 256 (2) of the Income-tax Act, 1961, the Tribunal was also directed to refer the following questions, as questions of law arising out of its order, for the opinion of this court :" 1. Whether, on the facts and in the circumstances of the case, the offer of sales made by the assessee to the foreign customers, which were not accepted by the said customers, could be construed as contracts for the purposes of the proviso to Section 43 (5) of the Income-tax Act, 1961 ? 2. If the answer to question No. 1 is in the negative, then, whether, on the facts and in the circumstances of the case, the loss of Rs. 86,238 was correctly held by the Income-tax Officer as a loss arising from speculative transactions ? " ( 15 ) THE above questions are the subject-matter of Income-tax Reference No, 158 of 1981. If the answer to question No. 1 is in the negative, then, whether, on the facts and in the circumstances of the case, the loss of Rs. 86,238 was correctly held by the Income-tax Officer as a loss arising from speculative transactions ? " ( 15 ) THE above questions are the subject-matter of Income-tax Reference No, 158 of 1981. ( 16 ) AT the hearing before us, the learned advocate for the Revenue drew our attention to Section 43 (5) of the Income-tax Act, 1961, the material portion whereof is as follows :"section 43 : (5) 'speculative transaction' means a transaction in which a contract for the purchase or sale of any commodity, including stocks and shares, is periodically or ultimately settled otherwise than by the actual delivery of transfer of the commodity or scrips : provided that for the purposes of this clause- (a) a contract in respect of raw materials or merchandise entered into by a person in the course of his manufacturing or merchanting business to guard against loss through future price fluctuations in respect of his contracts for actual delivery of goods manufactured by him or merchandise sold by him ;. . . . . . shall not be deemed to be a speculative transaction. " ( 17 ) CONSTRUING the said section, the learned advocate for the Revenue contended that in order to establish that its contracts for local purchase were hedging transactions and not speculative transactions, the assessee had to establish that the contracts for local purchases were to the assessee guard against loss through future price fluctuations in respect of its contracts for actual delivery of goods or merchandise sold by it. The learned advocate submitted that in the instant case, where the firm offers of the assessee were not accepted by the foreign purchasers, no contract for actual delivery of goods came into existence, and, therefore, the assessee could not claim that the local transactions for purchases were transactions for guarding against loss through future price fluctuations in respect of any contract for actual delivery of goods. Therefore, the said local purchase transactions were speculative transactions and the loss suffered by the assessee in respect thereof was speculative loss. ( 18 ) THE learned advocate for the assessee contended to the contrary. Therefore, the said local purchase transactions were speculative transactions and the loss suffered by the assessee in respect thereof was speculative loss. ( 18 ) THE learned advocate for the assessee contended to the contrary. He submitted that in order to appreciate the issue, the entire transaction and the method of operation of the assessee and not the individual transaction. had to be considered. On the question, whether the local purchase transactions were hedging contracts or speculative transactions, he submitted that it has been found as a fact that by making firm offers, the assessee bound itself to export goods to its foreign purchasers resulting in actual deliveries thereof. In respect of such firm offers, the assessee entered into local purchase transactions in order to guard against loss through future price fluctuations. Viewed in its entirety, there were always contracts for actual delivery of goods against which the said local purchase transactions were entered into. He submitted that the law stood well-settled that hedging contracts could be entered into even before the main contract for actual delivery of goods was entered into. ( 19 ) IN support of his contentions, the learned advocate for the assessee cited CIT v. Gourepore Co. Ltd. [1982] 135 ITR 606, where a Division Bench of this court considered the meaning of the expression " hedging contracts ". In the said judgment, the observations of a Full Bench of the Gujarat High Court in Pankaj Oil Mills v. CIT [1978] 115 ITR 824, were quoted with approval as follows (at p. 616 of i35 ITR) :" Hedging contracts need not succeed the contracts for sale and actual delivery of goods manufactured but the latter may be subsequently entered into provided they were within a reasonable time not exceeding generally the assessment year. " ( 20 ) ON a consideration of the facts and circumstances of the instant case, it appears to us that the local purchase contracts which were entered into by the assessee were intended to guard the assessee against loss through future price fluctuations in respect of its contracts for actual delivery of goods or merchandise sold by it. " ( 20 ) ON a consideration of the facts and circumstances of the instant case, it appears to us that the local purchase contracts which were entered into by the assessee were intended to guard the assessee against loss through future price fluctuations in respect of its contracts for actual delivery of goods or merchandise sold by it. It has been found that about 80% of the said contracts resulted in export and, consequently, in actual delivery, and in or about 15% or 20% of the cases, by reason of the non-acceptance of the offers of the assessee, foreign contracts could not be concluded. It is to be noted that the language of the proviso to Section 43 (5) of the Income-tax Act is that a contract in respect of raw materials or merchandise entered into by a person intended to guard against loss through future price fluctuations is to be considered in respect of its contracts for actual delivery of goods sold. It is to be noted that the expression is used in plural, viz. , " contracts ", and not an individual contract. Therefore, in our view, where the assessee had entered into a number of contracts in the foreign market and had also entered into a number of local purchase transactions to guard against future price fluctuations, it should be held that the conditions of the proviso to Section 43 (5) stood satisfied though the foreign and the local contracts did not actually match. In all cases, the contracts for actual delivery of goods in the foreign market may not materialise by reason of non-acceptance of the offers, but at the time when the local purchase contracts were entered into, the assessee remained bound by its firm offers to actually deliver the goods in the foreign market if the offers were accepted and the assessee had in contemplation that a contract for actual delivery of goods in the foreign market would be concluded. ( 21 ) FROM another point of view, a contract for actual delivery of goods even concluded may not ultimately materialise, e. g. , by a foreign purchaser ultimately repudiating the contract. ( 21 ) FROM another point of view, a contract for actual delivery of goods even concluded may not ultimately materialise, e. g. , by a foreign purchaser ultimately repudiating the contract. But the assessee to the extent he guards against loss through future price fluctuations by entering into a local purchase contract cannot be held to have lost the benefit under the proviso and it cannot be held that the local purchase contract would be a speculative contract. ( 22 ) FOR the above reasons, we accept the contentions of the assessee. We answer the only question referred in Income-tax Reference No. 165 of 1976 in the affirmative and in favour of the assessee. ( 23 ) QUESTION No. 1 in Income-tax Reference No. 158 of 1981 is answered by stating that apart from the offers of the assessee which were not accepted by foreign customers, there were other contracts which had been so accepted and, therefore, the assessee was entitled to the benefit of the proviso to Section 43 (5) of the Income-tax Act, 1961. By reason of the answer to the above question, no answer is called for to question No. 2, in Income-tax Reference No. 158 of 1981. We decline to answer the same. There will be no order as to costs.