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TMI Blog1962 (2) TMI 106X X X X Extracts X X X X X X X X Extracts X X X X ..... profession or vocation', any loss sustained in speculative transactions which are in nature of a business shall not taken into account except to the extent of the amount of profits and gains, if any, in any other business consisting of speculative transaction. The assessment year of the assessee company for the purpose of this reference is 1953-54, the corresponding accounting year being the financial year ending on March 31, 1953. During the relevant period the assessee carried on business in managing agency, money-lending, etc. It also carried on a speculative business in sales and purchases of gunny bags, the loss whereof was computed at ₹ 57,750. The assessee claimed to set off the same towards its business income from managing agency, money-lending, etc., in the year showing a net profit of ₹ 59,289. The Income-tax Officer added back the loss of ₹ 57,750 and this was upheld both by the Appellate Assistant Commissioner and the Tribunal. The question which has been referred to us is: Whether, on the facts and in the circumstances of the case, the loss arising in the speculation business could be set off against the other business income fall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mahratta Railway Company Ltd. v. Bezwada Municipality [1944] L.R. 71 I.A. 113, 122; A.I.R. 1944 P.C. 71, 73: The proper function of a proviso is to except and deal with a case which would otherwise fall within the general language of the main enactment, and its effect is confined to that case. This has been quoted in many judgments of different High Courts in India including some of our Supreme Court. Reference was made to the judgment of the Supreme Court in Commissioner of Income-tax v. Indo-Mercantile Bank Ltd. [1959] 36 I.T.R. 1, 7; [1959] Supp. 2 S.C.R. 256, where it was said: Ordinarily it is foreign to the proper function of a proviso to read it as providing something by way of an addendum or dealing with a subject which is foreign to the main enactment. It was strenuously argued that section 24(1) does not fall to be considered at all unless the assessee claims to set off a loss of profits or gains in any year under any of the heads mentioned in section 6 against his income, profits or gains under any other head in that year as the authorities mentioned above lay down that in arriving at the net result under section 10 losses in any business must first be deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elf. All the profits and gains of business, profession or vocation carried on by an assessee have to be computed under this section and in order to arrive at the total income of an assessee (an expression defined in section 2(15) of the Act) the revenue authorities must find out the total amount of income, profits and gains computed in the manner laid down in the Act. Chapter IV of the Act containing section 18 to 39 is headed deductions and assessment . Section 18 deals with deduction at source, 18A with advance payment of tax, 19 for payment in other cases. Section 22 deals with return of income which must be submitted by all persons whose total income during the previous year exceeded the maximum amount which is not chargeable to income-tax. Section 23 gives the Income-tax Officer jurisdiction to assess the total income of the assessee and determine the sum payable by him. Section 23A, 24A, 25 and 25A contain provisions for assessment in certain special cases. Section 24 which falls within this group of sections providing for assessment is headed set-off of loss in computing aggregate income. Without this section it would be difficult to compute the total income of an asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et off against profits and gains of business which was not speculative but not against profits and gains under any of the other heads mentioned in section 6. Reading the whole of the proviso it appears to me that what the legislature was aiming at was to prevent loss sustained in speculative transactions reducing the taxable income of an assessee. The legislature seems to have provided for setting off of loss in speculative transactions only against profits and gains of business of a similar nature. Such losses are allowed to be carried forward but even under sub-section (2) are not to be set off except against profits made in business of the same nature. In this connection reference may be made usefully to the objects and reasons for enacting this proviso. This proviso was inserted in the main section by section 3 of the Finance Act of 1953 (XIV of 1953) with effect from April 1, 1953. It forms sub-clause (d) of clause 3 of the Bill and the Objects and Reasons of the Finance Bill of 1953 to be found at page 41 onwards of volume 23 of the Journal Section of the Income-tax Reports shows that the legislature wanted to restrict the set-off of speculation losses against speculation ..... X X X X Extracts X X X X X X X X Extracts X X X X
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