SAHU JAIN LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) BUSINESS consisting of a speculative transaction. The key words which are to be construed in the proviso are "in computing the profits and gains chargeable under the head profits and gains of BUSINESS, profession or vocation", and having regard to the scheme of the Act, especially Chapters III and IV, it is manifest that the question of set-off only arises after the profits and gains of a BUSINESS, profession or vocation have been computed in the manner laid down in Chapter III. The process of computation as understood by the Indian Income-tax Act is antecedent to the question of the right of the assessee to claim any set-off under section 24. In other words, the question of set-off only arises when there is a loss under one head, the loss having been arrived at in the manner of computation laid down in Chapter III, and there is a profit under another head, the profit having been arrived at in the manner laid down in Chapter III. It is also significant that in the proviso to section 24(1) the expression "set-off" is not used; the expression used is "taken into account". It is, therefore, manifest from the language used in the proviso that the legislature intended to enact a substantive provision, though in the garb of a proviso, and the application of the proviso cannot, therefore, be restricted to the provision of section 24(1).

(2.) THE view that I have expressed is borne out by the decision of the Bombay High Court in Keshavlal Premchand v. Commissioner of Income-tax. Chagla C.J. also pointed out in that case that it was a sound rule of interpretation that a statute should be so construed as to prevent the mischief and to advance the remedy according to the true intent of the makers of the statute. Chagla C. J. took judicial notice of the fact that in recent times businessmen have been known to buy speculative losses in order to reduce their profits, and clearly the legislature was aiming at that mischief, and that mischief could only be removed by preventing the assessee from reducing his profits by these speculative losses, and that was what was exactly done by the legislature in enacting the proviso. I respectfully agree with the line of reasoning which has èbeen adopted by Chagla C.J. in the Bombay case. THE same view as to the interpretation of section 24(1) has been expressed by the Madhya Pradesh High Court in Commissioner of Income-tax v. Ramgopal Kaniyalal and by the Punjab High Court in Commissioner of Income-tax v. Kumkum Chand Dalal, Manohar Lal Munshi Lal v. Commissioner of Income-tax and Commissioner of Income-tax v. Ramp Sarup. THE decision of the Bombay High Court in Keshavlal Premchand v. Commissioner of Income-tax, has also been followed by the Madras High Court in P.S.N.M.K. Ramalingam Chettiar v. Commissioner of Income-tax and by the Andhra Pradesh High Court in Jummarlal Surajkaran v. Commissioner of Income-tax.

(3.) AFTER closely examining the language of this proviso, the Supreme Court held that the case fell within the normal principle that the territory of a proviso was to carve out an exception to the main enactment and to operate in the same field. It was further pointed out by the Supreme Court in that case that in the proviso in question there were no positive words which would support an interpretation in favour of the disintegration of the head "business" and compel the application of the proviso to the same head. It is manifest that the language of the proviso which was the subject-matter of interpretation in the Supreme Court case is markedly different from the language of the proviso which is the subject-matter of èinterpretation in the present case. I am, therefore, of opinion that the ratio decidendi of the Supreme Court decision cannot apply to the present case and the same conclusion cannot be reached with regard to the interpretation of the proviso with which we are concerned in the present case.