Law:

Section:

Section 73 of the Income-tax Act, 1961 [Corresponding to section 24(1) of the Indian Income-tax Act, 1922] - Losses - In speculation business - Whether while computing profits and gains chargeable under head "Profits and gains of business, profession or vocation" losses sustained in speculative business cannot be adjusted against profits under other items within that head - Held, yes FACTS The assessee derived income in the relevant year from (i ) house property; (ii) money lending and commission agency; and (iii) speculation in gold, silver and cotton. The ITO refused to adjust the loss in the speculation business against the profits from other business which was upheld by the AAC. However, on second appeal, the Tribunal allowed the assessee's claim. On reference : HELD What is being laid down in the proviso is for the purpose of ascertaining the income from a particular head under section 10 of 1922 Act. The words "any loss sustained in speculative transactions which are in the nature of a business" further confirm this inference. It is obvious that the losses are in one of the businesses of the assessee for which special provision is being made. That special provision is that the losses shall not be adjusted towards the profits of any other business. Such a contingency cannot arise at all if the proviso were to operate only within the field of the main provision. It would in that case be more or less meaningless. It was therefore held that the proviso affects expressly the method of ascertaining profits and losses of the various business. It, therefore, followed that the losses in speculative business, could not be adjusted against the profits of other businesses. It was therefore concluded that in computing the profits and gains chargeable under the head "profits and gains of business, profession or vocation" the losses sustained in speculative business cannot be adjusted against the profits under other items within that head. Note : The case was decided in favour of the revenue. CASES REFERRED TO CIT v. C.P. Syndicate [1952] 22 ITR 493 (Nag.), CIT v. Hira Lal Narain Dass [1953] 24 ITR 199 (Delhi), CIT v.Indo-Mercantile Bank Ltd. [1959] 36 ITR 1 (Ker.) and…

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