Law:

Section:

Section 73 of the Income-tax Act, 1961 [Corresponding to section 24(2) of the Indian Income-tax Act, 1922] - Losses - In speculation business - Assessment year 1940-41 - Whether where assessee HUF was carrying on business in cloth, losses carried forward in speculation business could be set off against profits in speculative business in shares and other forward contracts but not against dealings in cloth carried on by assessee firm - Held, yes FACTS The assessee HUF had been carrying on business in cloth and had branch in Calcutta and head office at Benars. In the Calcutta branch two sets of account books were maintained, one related to the speculative part of the business which considered of forward transactions and the other related to business done in Banarsi goods. In the assessment year 1939-40, account year 1938-39, the Calcutta branch incurred certain loss in share business. In the year 1940-41, it showed a profit in share transactions and a much larger profit in the other speculative transaction which appeared to have been in linseed and hemp. The assessee claimed that the loss of the account year 1938-39 should be set off against the profits made in speculative transactions in Calcutta in the year 1940-41. The ITO however, allowed only the sum, which was the profit made in share dealings, to be set off and held that the balance of the loss could not be set off against the profits made in speculative transactions on the ground that under section 24(2) the losses for the previous year could be set off only against the profits made in the following year in the same business. On reference: HELD It is now well-settled that the question whether the profits made in the following year are the profits from the same business or a different business is a question of fact. Dealings in shares and securities are not dependent on the dealings in the other things mentioned, and the stoppage of the one would not affect the running of the other. It could not reasonably be urged that business in shares and securities was not a separate business, but was so interlocked with other businesses of the assessee as to be really one business. The words 'same business' in section…

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