KESHAVLAL PREMCHAND Vs. COMMISSIONER OF INCOME-TAX BOMBAY

JUDGEMENT

(1.) The question that we have to consider and decide in this reference lies in a very narrow compass, although it has given rise to a very interesting debate at the Bar. There was a loss of Rs. 19,723 in a speculative business carried on by the assesses in the year of account and the assessee's contention was that he was entitled to take this loss into account in arriving at the profits and gains of his business. The Taxing Department rejected that contention on the ground that by reason of the first proviso to Section 24(1), Income-tax Act the assessee was not entitled to take into consideration a speculative loss, and that contention has been upheld by the Tribunal. The assessee also had raised an issue before the Tribunal that this was not a speculative loss, but that issue has not been pressed before us by Mr. Palkhivala.

(2.) Now Section 24(1) deals with set off of a loss in computing aggregate income and, as is now well settled, the scheme of that section is to entitle an assessee to claim a set off in respect of a loss under one head against a profit under another head, and the proviso to that section which was incorporated in the Income-tax Act in 1953 is to the following effect:

(3.) Mr. Palkhivala has drawn our attention to the basic principles which have been well settled by now, which a Court adopts in construing a proviso to a section. A proviso, which is in fact and in substance a proviso, can only operate to deal with a case which but for it would have fallen within the ambit of the section to which the proviso is a proviso. The section deals with a particular field and the proviso excepts or takes out or carves out from the field a particular portion, and therefore it is perfectly true that before a proviso can have any application the section itself must apply. It is equally true that the proviso cannot deal with any other field than the field which the section itself deals with. The duly of the Court also must be to give to the proviso as far as possible a meaning so restricted as to bring it within the ambit and purview of the section itself. If a proviso is capable of a wider connotation and is also capable of a narrower connotation, if the narrower connotation brings it within the purview of the section then the Court must prefer the narrower connotation rather than the wider connotation. But -- and this is equally clear -- a Legislature may enact a substantive provision in the garb or guise of a proviso and if the Court is satisfied that the language used in the so-called proviso is incapable of making it applicable to the section, then the Court, if the proviso has a clear meaning, must look upon the proviso as a substantive provision enacted by the Legislature and give effect to it as such.