JUMMARLAL SURAJKARAN Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) IN compliance with the order of this court under section 66(2) of the INdian INcome-tax Act the following questions have been referred to this court for its opinion.

(2.) THE material facts may be briefly narrated. THE assessee carries on business as merchant and commission agent in several commodities, both ready business and forward business being done in such commodities. In the assessment year 1954-55 for which the "previous year" is the Dewali year ended November 6, 1953, the assessee adjusted a loss of Rs. 28,839 sustained in certain forward transactions relating to new gunnies against the other profits earned in other business. Originally, he had entered into forward contracts for the purchase of 777 bales of gunnies and, under these contracts, the assessee had the option either to take delivery of the goods or to pay the difference on mill contract rate basis at any time before the date of settlement. He took delivery of only 127 bales out of the 777 bales covered under the forward contracts and settled to the difference as above in regard to the balance amounting to Rs. 28,839. He claimed to be entitled to take into account this loss in computing his business profits. THE taxing department rejected this contention on the ground that the assessee was not entitled to take into consideration the loss incurred by him in transactions of a speculative nature by reason of proviso (1) to section 24 of the Indian Income-tax Act. This was confirmed on appeal by the Appellate Assistant Commissioner and by the Income-tax Appellate Tribunal on further appeal.

(3.) IT is seen that this proviso lays down the mode in which the profits and gains of business, profession, or vocation should be computed. The purpose of the proviso is that the loss sustained in a speculative business should be set off only against the profits of a business of the same nature under the same head.