Law: Income Tax Act, 1922

Section: 24(1)

Income-tax Act (XI of 1922)---S. 24 (1), provisos first and second-Speculation business--Setting off of loss-First proviso to S. 24 (1), held, in nature of independent provision of law and not controlled by second proviso to S. 24 (1)-­Net loss suffered in speculative business-Held, instead of being dis­tributed among partners can be carried forward for being set off against income from same business in subsequent years. Commissioner of Income-tax, Gujrat v. Kanti Lal Muhammad, Sami (1967) 63 I T R 318 ; Commissioner of Income-tax v. Haji Ferozzuddin P L D 1967 Kar. 812 and Haji Mushtaq Ahmad v. Commissioner of Income-tax P L D 1978 Kar. 414 rel. JUDGMENT SABBDUZZAMAN SIDDIQUI, J.-The following question has been referred to us by the Commissioner of Income-tax under section 66(1) of the Income Tax Act, 1922 for decision "Whether on the facts and in the circumstances of the case the Tribunal was justified in holding that the net loss, instead of being distributed among, partners, should be carried forward for being set off against income from the some business, in subsequent years?" However, at the hearing of the reference be learned counsel for the parties agreed that the question needs modification and accordingly we notified the question as suggested by the counsel jointly as follows :- "Whether on the facts and in the circumstances of the case the Tribunal was justified in holding that the net loss suffered in a speculation business instead of being distributed among partners should be carried forward for being set off against income from the same business, in subsequent years?" We have heard Mr. Nasrullah Awan and Mr. Ali Athar, the learned counsel for the department and the assessee respectively. The main contention of, the learned counsel for the department is that proviso 2 to section 24 (1) of the Income-tax Act controls the main section as well as the first proviso which was added by Ordinance XXV of 1960 on 1-7-1960. It is contended by the learned counsel for the department that whereas the first proviso to section 24 (1) deals only with the disposal of a loss suffered by an assessee in a speculation business, the 2nd proviso provides that how much…

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