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Issues Involved:
1. Set-off of speculative business loss against non-speculative business income under Section 24(1) of the Indian Income-tax Act. 2. Interpretation and scope of the proviso to Section 24(1). Issue-wise Detailed Analysis: 1. Set-off of speculative business loss against non-speculative business income under Section 24(1) of the Indian Income-tax Act: The primary issue in this case was whether the loss incurred by the assessee in a speculative business could be set off against the profits and gains of his other non-speculative business in the same year under Section 24(1) of the Indian Income-tax Act. The relevant portion of Section 24(1) stipulates that any loss of profits or gains in any year under any of the heads mentioned in Section 6 can be set off against income, profits, or gains under any other head in that year. However, the proviso to Section 24(1) states that any loss sustained in speculative transactions, which are in the nature of a business, shall not be taken into account except to the extent of the amount of profits and gains, if any, in any other business consisting of speculative transactions. The assessee, during the assessment year 1953-54, carried on multiple businesses, including managing agency, money-lending, and speculative business in gunny bags. The loss from speculative business was computed at Rs. 57,750, which the assessee sought to set off against the net profit of Rs. 59,289 from other businesses. The Income-tax Officer disallowed this set-off, and this decision was upheld by the Appellate Assistant Commissioner and the Tribunal. 2. Interpretation and scope of the proviso to Section 24(1): The assessee argued that the computation of profits and gains of its business, profession, or vocation must be done under Section 10, and all businesses should be computed separately. The net result should be taken as the profits and gains or loss for the relevant year. The assessee relied on the judgment of the Privy Council in Arunachalam Chettiar v. Commissioner of Income-tax and the Bombay High Court judgment in Commissioner of Income-tax v. Murlidhar Mathurawalla, which stated that different businesses do not constitute different heads under the Income-tax Act, and losses in any business must first be deducted from the profits in any other business of the assessee. However, the court noted that the proviso to Section 24(1) was not present at the time of the Murlidhar Mathurawalla case and that the proviso specifically restricted the set-off of speculative losses against speculative profits only. The court emphasized that normally a proviso is not meant to enlarge the scope of the main section, but there are instances where the legislature has effectively enlarged the scope through a proviso. The court cited Rhondda Urban District Council v. Taff Vale Railway Co. to illustrate that a proviso can sometimes act as a fresh enactment. The court examined the scheme of the Indian Income-tax Act, noting that Section 10 deals with the computation of profits and gains of business, profession, or vocation. The proviso to Section 24(1) specifically addresses the computation of losses in speculative transactions within this same field. The court concluded that the proviso aimed to prevent speculative losses from reducing the taxable income of an assessee and restricted the set-off of such losses to profits from speculative transactions only. The court also referred to the objects and reasons for enacting the proviso, which was inserted by the Finance Act of 1953 to check the practice of buying up speculative losses to reduce profits. The court agreed with the judgment in Keshavlal Premchand v. Commissioner of Income-tax, where it was held that the proviso was a substantive enactment aimed at preventing the mischief of reducing taxable income through speculative losses. Conclusion: The court held that the proviso to Section 24(1) of the Indian Income-tax Act restricts the set-off of speculative business losses to profits from speculative transactions only. The assessee's contention that speculative losses could be set off against non-speculative business income was rejected. The answer to the referred question was given in the negative, and the assessee was ordered to pay the costs of the reference.
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