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Interpretation of section 24(1) of the Income-tax Act regarding set-off of losses in speculative transactions against profits earned in other businesses. Analysis: The case involved a registered firm, which incurred a loss in speculative transactions and sought to set it off against profits earned in other businesses. The Income-tax Officer, the Appellate Assistant Commissioner, and the Income-tax Appellate Tribunal held that the loss in speculative transactions cannot be set off against profits under the first proviso of section 24(1) of the Income-tax Act. The Tribunal referred the question of interpretation to the High Court. The crux of the issue lies in the interpretation of the first proviso of section 24(1) of the Income-tax Act. The proviso states that losses in speculative transactions cannot be set off against profits in other businesses, except to the extent of profits in speculative transactions. The question arises whether this proviso applies only when setting off losses under different heads or also when computing profits under the head of "profits and gains of business, profession or vocation" under section 10. The High Court analyzed the language of the proviso and previous judgments to determine its scope. The Court considered the principles of statutory interpretation and the legislative intent behind the proviso. The Court referred to cases where similar provisos were interpreted to govern the method of computation of profits and losses. The Court highlighted that the proviso modifies the computation of profits and gains of business, profession, or vocation under section 10. The High Court referred to the judgments of other High Courts, such as the Bombay High Court and the Madhya Pradesh High Court, which held that the proviso in section 24(1) governs the computation of profits and losses under section 10. The Court emphasized that the proviso is a substantive provision dealing with the mode of computing profits and gains under the specified heads. In conclusion, the High Court held that the proviso in section 24(1) applies to the computation of profits and gains of business, profession, or vocation under section 10. The Court agreed with the interpretation that the proviso governs the method of arriving at the resultant profits or losses in the computation process. Therefore, the Court answered the referred question in the negative, stating that losses in speculative transactions cannot be set off against profits earned in other businesses.
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