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Interpretation of section 24 proviso regarding set-off of losses in speculative business against profits from other businesses under section 10 of the Income-tax Act, 1922. Analysis: The judgment by the Madhya Pradesh High Court dealt with a reference made under section 66(1) of the Indian Income-tax Act, 1922, regarding the entitlement of an assessee to set off a loss of &8377; 21,748 from speculative business against profits from other businesses under section 10 of the Act. The Income-tax Officer had refused to adjust the loss against profits, leading to appeals and the eventual reference to the High Court. The court outlined the scheme of the Income-tax Act, emphasizing the provisions of section 10 which govern the computation of income from business, profession, and vocation, and section 24 which allows for set-off of losses against gains. The specific proviso in section 24(1) restricts the set-off of losses in speculative transactions against profits from other businesses within the same head. The court referred to previous interpretations and a Supreme Court decision in Commissioner of Income-tax v. Indo-Mercantile Bank Ltd [1959] 36 ITR 1, which clarified the role of a proviso in carving out exceptions to the main enactment. The court highlighted that the proviso in question was intended to affect the method of computing profits and losses within the same head, specifically addressing losses in speculative business. The court noted that the wording of the proviso clearly indicated its application to the computation of income from different businesses under the same head, thereby disallowing the adjustment of speculative losses against profits from other businesses. Drawing on the Supreme Court's guidance and a Bombay High Court decision, the Madhya Pradesh High Court concluded that losses from speculative business cannot be set off against profits from other businesses within the head of "profits and gains of business, profession or vocation." The court answered the referred question in the negative, affirming that the proviso in section 24(1) restricts the adjustment of speculative losses against profits from other businesses under the same head. Since the assessee did not appear, no order as to costs was made.
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