Law: Income Tax Act, 1922

Section: 24

[Indian Income Tax Act, 1922(Xl of 1922)].....Section 24(1)-Speculation business--Commission-Business of speculation and brokerage-Commission received from parties entirely of different character from speculative transaction- Whether commission eligible to lax under the head "speculation business"-Held no; To put it differently, the assessee carries on two kinds of business, one in speculation and the other as a broker. On behalf of the respondent it was pointed out that the commission earned by the assessee was incidental to his business in speculation and the commission receipts arise out of the speculative transactions carried on by the assessee and so the commission receipts should be treated as profits arising out of speculation and not as profits from separate business. We are unable to accept this argument as right. In our opinion, the receipt of commission business is entirely of a different character from the profits and losses of the speculative transactions. The assessee does speculation business on his own account with the members of the association. The assessee also enters into forward contracts on behalf of his clients. This may result in a profit, in which case he recovers the commission from the clients and pays the profit to them. If it is a loss, the clients are bound to bear it but the assessee still is entitled to charge the commission from his clients. The point to be noted is that the assessee carries on these speculative transactions on behalf of his clients and not on his own behalf. There is thus no element of speculation in the commission income received by the assessee and the commission is earned and received by him independently of the profit or loss sustained by his clients in the transaction. We are accordingly of the opinion that the assessee is not entitled to get the commission receipts assessed under the head "speculation business" for the assessment years 1958-59, 1959-60 and 1960-61 and the question referred to the High Court should be answered in the negative and in favour of the Commissioner of Income Tax. JUDGMENT [The Judgment of the Court was delivered by RAMASWAMI, J].-These appeals are brought, by special leave, by…

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