1966 PLP 149 (PTD)
COMMISSIONER OF INCOME‑TAX, BOMBAY CITY I Versus CHIMANLAL J. DALAL & Co.
| Citation | 1966 PLP 149 (PTD) |
| Forum / Court | Bombay (India) |
| Bench Members | Y. S. Tambe and Y. S. Desai, JJ |
| Parties | COMMISSIONER OF INCOME‑TAX, BOMBAY CITY I Versus CHIMANLAL J. DALAL & Co. |
| Primary Law | STATEMENT OF CASE |
Q1: What are the key laws and sections cited in 1966 PLP 149 (PTD)?
This judgment primarily cites: STATEMENT OF CASE as referenced in Pakistani case law index.
Q2: Which judicial bench decided the case 1966 PLP 149 (PTD)?
The case was heard and decided by the Bombay (India) bench comprising: Y. S. Tambe and Y. S. Desai, JJ.
Q3: What is the official citation format for this judgment on Pakistan Law Portal?
Cite this legal precedent as: 1966 PLP 149 (PTD) (COMMISSIONER OF INCOME‑TAX, BOMBAY CITY I Versus CHIMANLAL J. DALAL & Co.). Read the full summary and cross-referenced laws free on Pakistan Law Portal.
Laws Cited
Representation
- "(3) It is the contention of the appellant that although the speculation loss of Rs. 2,60,128 for the assessment year 1958‑59 was allocated amongst the partners, this loss should have been carried forward and set off against the speculation profit of Rs. 2,38,777 earned by the firm for the assessment year 1959‑60. The arguments advanced by Shri S. P. Mehta, the appellant's Advocate, in support of this contention are on the following lines. The appellant is a registered firm whose income was assessed for the assessment year 1959‑60. The appellant should, therefore, be considered as an assessee within the meaning of section 2(2) of the Act. When a registered firm suffers a speculation loss, the speculation loss is disallowed for purposes of computing the total income as per the proviso to section 24 (1). However, when the registered firm earns a speculation profit and if the registered firm is also liable to be assessed as a separate entity, the speculation profit is also included in the total income for purposes of assessment of the registered firm. This position is anomalous and operates to the detriment of registered firms that are liable to be assessed. It was submitted that the proviso to section 24 (2) by which a registered firm is not entitled to carry forward and set off any loss which has been apportioned amongst the partners should be given a liberal interpretation in the case of registered firms which are liable to be assessed. This proviso was introduced at a time when registered firms were not assessed. Since registered firms with income exceeding Rs. 40,000 are now liable to be assessed, the benefit of carrying forward the loss of the earlier year which has been apportioned amongst the partners should not be denied to the registered firm.
Headnotes / Summary
Loss‑Registered firm‑Loss in speculation‑Whether can be carried forward and set off against profits in speculation of later year‑Indian Income‑tax Act, 1922, Ss. 23 (5), (6) & 24 (1). A registered firm is entitled to carry forward loss in specula tion suffered in an earlier year and set it off against profits from speculation of the subsequent year. Commissioner of Income‑tax v. Kantilal Nathuchand (1964) 53 I T R 420, doubted but followed for the sake of uniformity among the High Courts in the matter of interpretation of the Income‑tax Act. Keshavlal Premchand v. Commissioner of Income‑tax (1957) 31 I T R 7 and Maneklal Chunilal & Sons Ltd. v. Commissioner of Income‑tax (1953) 24 I T R 375 ref. By this application the Commissioner of Income‑tax, Bombay City I, Bombay, requires the Appellate Tribunal to refer to the High Court a question of law which is said to arise out of the Tribunal's order in I T A No. 6681 of 1960‑
61. Inasmuch as, in our opinion, a question of law does arise out of the aforesaid order of the Tribunal, we hereby draw up a statement of the case agreed to by the parties and refer it to the High Court of Judicature at Bombay under section 66 (1) of the Indian Income tax Act, 1922.
2. The assessee is a registered firm carrying on business as share and stock broker, ready and forward. For the calendar year 1957, the previous year for the assessment year 1958‑59, there was a speculation loss, which was computed at Rs. 2,60,
128. Acting under section 23 (6), the Income‑tax Officer apportioned this loss too among the various partners to be carried forward and set off in their respective future assessments against profit from speculation.
3. In the next calendar year 1958, the previous year for the assessment year 1959‑60 there was a speculation profit computed at Rs. 2,38,
777. The assessee contended before the Income‑tax Officer that the aforesaid speculation loss .of 1958‑59 should be carried forward and set off against this profit of the year. The Income‑tax Officer rejected this contention and apportioned the profit under section 23 (6) in the same manner as he did for the earlier year.
4. The assessee thereupon appealed to the Appellate Assistant Commissioner repeating its contention. The arguments before him and his reasons for dismissal of the appeal are extracted below from his order: "(3) It is the contention of the appellant that although the speculation loss of Rs. 2,60,128 for the assessment year 1958‑59 was allocated amongst the partners, this loss should have been carried forward and set off against the speculation profit of Rs. 2,38,777 earned by the firm for the assessment year 1959‑
60. The arguments advanced by Shri S. P. Mehta, the appellant's Advocate, in support of this contention are on the following lines. The appellant is a registered firm whose income was assessed for the assessment year 1959‑
60. The appellant should, therefore, be considered as an assessee within the meaning of section 2(2) of the Act. When a registered firm suffers a speculation loss, the speculation loss is disallowed for purposes of computing the total income as per the proviso to section 24 (1). However, when the registered firm earns a speculation profit and if the registered firm is also liable to be assessed as a separate entity, the speculation profit is also included in the total income for purposes of assessment of the registered firm. This position is anomalous and operates to the detriment of registered firms that are liable to be assessed. It was submitted that the proviso to section 24 (2) by which a registered firm is not entitled to carry forward and set off any loss which has been apportioned amongst the partners should be given a liberal interpretation in the case of registered firms which are liable to be assessed. This proviso was introduced at a time when registered firms were not assessed. Since registered firms with income exceeding Rs. 40,000 are now liable to be assessed, the benefit of carrying forward the loss of the earlier year which has been apportioned amongst the partners should not be denied to the registered firm. (4) I am unable to accept the contentions of Shri S. P. Mehta. No doubt in the circumstances explained by him registered firms are at a disadvantage in not being allowed to carry forward the speculation loss of the earlier years which has been apportioned amongst the partners although the registered firm is liable to be assessed on the speculation profit earned in a subsequent year. The taxing statute has, however, to be construed strictly even though a strict interpretation may result in certain anomalies. Even after registered firms with income over Rs. 40,000 were made liable for assessment, clause (c) of the proviso to section 24(2) has not been amended so as to enable these registered firms to carry forward and set off the loss of the earlier year which has been apportioned amongst the partners. As the clause stands at present registered firms are not entitled to carry forward and set off any loss which has been already apportioned amongst the partners. If the contentions of Mr. S. P. Mehta were to be accepted, the position would be that the benefit of carrying forward the loss of the earlier year will be availed of both by the registered firm as well as by the partners. The speculation loss of Rs. 2,60,128 suffered by the firm for the assessment year 1958‑59 was allocated amongst the partners. As per clause (c) of section 24(2) it is, therefore, not open for the registered firm to claim that the speculation loss should be carried forward and set off against the speculation profit of Rs. 2,38,777 determined for the assessment year 1959‑
60. This contention of the appellant, therefore, fails."
5. An appeal to the Tribunal thereupon followed. The Tribunal accepted the. assessee's appeal in paragraphs 2, 3 and 4 of its order reproduced below: "(2) The contention of the assessee appears to us to be well founded. In a plain reading of the proviso to section 24 (1) and the Explanation (l) thereto, speculation business requires to be deemed to be distinct and separate from any other business; the loss from such business in any year shall not be taken into account in the computation of 'Profits and gains of business, profession or vocation' for assessment under section 10; if there is, however, a profit from such speculation business, only then it shall be so included in such a computa tion; the divisible profits for purposes of section 23 (6) cannot include speculation loss as it cannot enter into the computation under section 10 and it commences to do so only after the loss is wiped out by future profits. (3) A registered firm is an assessee under the definition in section 2 (2) as tax is payable by it, in certain circumstances no doubt, but clearly so when a tax is demanded from it. In this situation this registered firm, assessee, can demand under section 24 (2) (t) that the loss it had suffered in the assessment year 1958‑59 shall be carried forward in its own account and set off against future profits from the same business in speculative transactions as laid down therein. It is only after the set‑off, if in any year there is left any profit, that such profit becomes liable to get included in the computation under section 10 for that year. Till such a contingency occurs, the loss from such a business requires to be carried forward in its own assessment pending such set‑off and not liable to be apportioned under section 23 (6). (4) The Appellate Assistant Commissioner, as one of his reasons for rejecting the assessee's claim, has stated that if it is conceded, the benefit of the carry forward will be availed of twice by the assessee‑firm as well as by each of the various partners. It is clearly not so. The loss in question is not capable of apportionment under section 23 (6) as it cannot enter into the computation of the divisible profits through section
10. Even it i.e. is divided, it cannot serve any useful purpose to the partner as cannot be set off under section 24 (1) in his own assessment in the normal manner; it will have to wait for a similar apportionment of speculation profit in a future year."
6. From out of the aforesaid facts, the question of law that arises is: "Having regard to the latter part of the second proviso to section 24 (1) whether the speculation loss of Rs. 2,60,128 determined for the assessment year 1958‑59 which was apportioned among the partners of the firm under section 23 (6) can be set off against the speculation profit of the assessee‑firm for the assessment year 1959‑60?" G. N. Joshi with IZ. J. Joshi for the Commissioner. S. P. Mehta and Y. P. Trivedi for the Assessee.
Judgment & Decree
Mr. Joshi, learned counsel for the Revenue, contends that having regard to the relevant provisions of section 24, and on a true construction of the relevant provisions of subsections (5) and (6) of section 23 and section 24 of the Act, the registered firm .is not entitled to carry forward the speculation losses of the earlier years and have them set off against the speculation profits of the year of assessment. The speculation losses of the earlier years have to be apportioned to the respective shares of the partners in those very assessment years themselves. Mr. Mehta, on the other hand, contends that a registered firm is entitled to carry forward speculative losses of earlier years and set it off against the speculative profits earned in the year of assessment under subsection (2) of section 24 of the Act. According to Mr. Mehta, the speculative losses do not get apportioned amongst the partners of a registered firm. They remain out of the apportionment and are available to a registered firm. for being set off against speculative profits of the following year. Mr. Mehta stated before us that he adopts the decision of the Gujarat High Court in Commissioner of Income‑tax v. Kantilal Nathuchand (1964,53 I T R 420) as his argument in support of the contention. It is indeed true that the decision of the Gujarat High Court fully supports the contentions raised by Mr. Mehta. Facts in that case were: The assessee was a registered firm. It suffered losses in speculation business in the assessment years 1958‑59 and 1959‑60, amounting to Rs. 6,26,606 and Rs. 5,416 respectively. In the assessment year 1960‑61, it earned a profit in speculation business amounting to Rs. 6,19,
784. The said loss in the years 1958‑59 and 1959‑60 had been apportioned as amongst the partners in the assessments of those respective years. The assessee claimed that the losses in the speculation business suffered by it in the assessment years 1958r59 and 1959‑60 should be set off against the profits of the speculation business earned in the assessment year 1960‑
61. The Tribunal had upheld the contention raised on behalf of the assessee. At the instance of the Commissioner of Income‑tax, a reference was made by the Tribunal to the High Court. The High Court decided the reference against the Revenue, holding that : "Section 24 (I) does not apply to loss incurred in speculative business and so the loss sustained by a registered firm in speculative business cannot be apportioned amongst its partners under the second proviso to section 24 (1). The registered firm is entitled under section 24 (2) to have such a loss carried forward and set off against profits earned by it in speculative business in a subsequent year." Facts in the case decided by the Gujarat High Court and those of the case before us are very similar. Barring some exceptions, it has been the general policy laid down by this Court in income‑tax matters that whatever our own view may be, we should follow the view taken by another High Court _ on the interpretation of a section. Chagla, C. J., though he disagreed with the view taken by the Madras High Court, followed that view in Maneklal Chunilal & Sons Ltd. v. Commissioner of Income‑tax ((1953) 24 I T R 375). At page 385 of the report, Chagla, C. J. observed: "A Special Bench of the Madras High Court has taken the view favourable to the Commissioner and contrary to the view suggested by Mr. Palkhivala and in conformity with the uniform policy‑ which we have laid down in income‑tax matters, whatever our own view may be, we must accept the view taken by another High Court on the interpretation of the section of a statute which is an all India statute." This is the practice of, this Court, and, as we have already stated, it has been generally followed by this court, barring certain exceptions like where inadvertently the decision was not brought to its notice or where in the decision of the other courts some relevant provisions of law had been omitted to be considered. The decision of the Gujarat High Court is a very elaborate one, considering all the relevant provisions of law. This is, therefore, not a case in which we should depart from the aforesaid policy of this court. The answer, therefore, will have to be against the Revenue. However, it should not be understood that, in our opinion; the contentions raised on behalf of the Revenue are without merit. Had the matter to be decided for the first time we might have agreed with the construction canvassed for on behalf of the Revenue, inasmuch as in our opinion, it is in harmony with the general intention of the Legislature expressed in the Act in respect of the assessment of a registered, firm. The relevant provisions in an enactment have to be construed as a whole. We may briefly state our reason Section 3, which is a charging section, charges to tax the total income earned by an assessee in a year of assessment. A registered firm is one of the units, of assessment, and in that sense, an assessee. Total income has been defined in section 2 (15) as " `total income' means total amount of income, profits and gains referred to in subsection (1) of section 4 computed in the manner laid down in this Act". Section 4 provides that subject to the provisions of this Act, the total income of any previous year of any person includes all income, profits and gains from whatever source derived. Six heads of income chargeable to income‑tax are enumerated in section
6. One of them is: "Profits and gains of business, profession and vocation". Sections 7, 8, 9, 10 and 12 (2) (b) provide the mode of computation of income under different heads.. Section 10 relates to the computation of income under the head: "Profits and gains of business, profession and vocation". Section 13 relates to the method of accounting adopted by an assessee, and its relative evidentiary value in assessment. Section 14 relates to exemptions of a general nature. Sections 15, 15A, 15B and 16 relate to exemptions of a special nature like the exemption in respect of premia on life insurance policies paid, earned income, donations and charities, etc. Section 16 partly deals with certain exemptions as well as making additions to the income of the assessee in certain cases. Section 17 relates to determination of tax payable. in certain special cases like person not resident in taxable territories, etc. These are the material provisions relating to the computation of income under various heads. A situation may arise and often arises when an assessee has more than one source or heads of income. In computation of income from these different sources, the result may in case of income from one source be profit and in the other a loss. In what manner these situations have to be dealt with in computation of the total income is provided in section 24, and the section provides in what manner the loss under one head should be set off' against profits under another head in computation of the aggregate income. It is on the computation of this aggregate income that ultimately an assessment is made under section
23. In brief, thus, income‑tax is charged on an assessee in respect of the total income derived by him from the various heads of his income chargeable to tax and computed in the manner provided in the Act. All the provisions of the Income‑tax Act ultimately are directed towards the ascertainment of the total income, bring ing it to tax, and the recovery of tax from persons liable to pay the tax. The proceedings ultimately culminate in an assessment under section 23 of the Act, under which the amount of total income is computed and the amount of tax payable by an assessee is quantified. The first stage, therefore, is determination of the income, either profit or loss, under the various heads. The second stage is adjustments and the results obtained under the different heads for determination of the aggregate amount of total income, and the last stage is determination of the amount of total income and quantification of the tax on the amount of total income so determined. Section 24 which relates to set‑off of loss under one head against profits of another head for purposes of determination of total income thus comes into play after determination of the income under different heads, and the levy of tax under section 23 would be the final stage after the determination of the total income. The provisions of sections 24 and 23 are thus closely interconnected. It would be at this stage convenient to refer to the relevant provisions of sections 23 and
24. Subsections (5) and (6) of section 23 provide the special mode of assessment of a registered firm. The material part runs "23. (5) Notwithstanding anything contained in the foregoing subsections, when the assessee is a firm and the total income of the firm has been assessed under subsection (1), subsection (3) or subsection (4), as the case may be,‑ (a) in the case of a registered firm, (i) the income‑tax payable by the firm itself shall be determined ; and (ii) the total income of each partner of the firm, including therein his share of its income, profits and gains of the previous year, shall be assessed and the sum payable by him on the. basis of such assessment shall be determined Provided that if such share of any partner is a loss it shall be set off against his other income or carried forward and set off in accordance with the provisions of section 24: . . . . (6) Whenever the Income‑tax Officer makes a determination in accordance with the provisions of subsection (5), lie shall notify to the firm by an order in writing the amount of the total, income on which the determination has been based and the apportionment thereof between the several partners." It would be seen that the assessment of the registered firm is a composite assessment both of the registered firm as well as its partners. Whether the firm is registered or not, the first stage is common, namely, determination of the total income of the firm. The difference starts from this stage. In the case of an unregistered firm, tax is levied on the unregistered firm itself and recovered from it. The partners are not charged to tax in respect of their partnership income. There is, however, a difference in the case of a registered firm. After computation of the total income of a registered firm, tax payable by the firm itself is determined and levied. The tax imposed on a registered firm since 1956 is however at a very low rate. The Income‑tax Officer is also required to determine the total income of each partner of a registered firm including therein his share of its income, profits and gains of the previous year. In other words, the Income‑tax Officer has to determine the total income of an individual partner of a registered firm after taking into account his share of income in the profits and gains in the business of a registered partnership.. After the said amount of total income is determined, the Income tax Officer has to determine the tax payable by an individual partner on the basis of his total income inclusive of his share of profits in the partnership business. Proviso to subsection (5) (a) makes it clear that loss suffered by an individual partner in the business of the partnership enters his personal assessment, and he has a right to set off that loss against his income from other sources as well as to carry it forward and set off the unabsorbed loss against income of subsequent year in accordance with the provisions of section
24. The scheme of section 23 (5) thus is that except a nominal tax levied on the registered firm in respect of its income in certain cases, the liability to pay tax thereon in substance is of its partners. The positive result of computation of total income of a registered firm, i.e., profits, or the negative result, i.e., loss, enters the assessment of the individual partners in proportion to their respective shares therein and is taken in account in the computation of their respective total income. No exception in respect of the speculative loss has been, in express terms, made therein. In the context of this position emerging from subsection (5), the provisions of subsection (6) have to be read, and it provides that the Income‑tax Officer has to notify to the firm the amount of its total income determined by him as well as apportionment thereof as amongst its partners. The question to be considered is whether in respect of the speculative loss the position is in any way different by reason of the provisions of section 24 (1). Section 24 (1) relates to the set off of loss under one head against income, profits and gains of the other in the matter of computation of the aggregate income. The stage contemplated by section 24 thus is earlier than that of the final stage, namely, determination of the amount of total income. It is a step in aid in determining the resultant amount of total income. The stage of assessment of partners of a registered firm contemplated in subsection (5) (a) (ii) is a stage subsequent to the determination of the total income of a registered firm, and as we have already pointed out, it provides that the positive income, that is, profits as well as negative income, i.e., loss, sustained by a registered firm are both to be distributed and apportioned as amongst its partners in proportion of their respective shares. This intention of the Legislature is clearly indicated in sub section (5) (a) (ii) of section 23 read with the proviso. We now turn to the relevant provisions of section 24, and the material part reads "24. (1) Where any assessee sustains a loss of profits or gains in any year under any of the heads mentioned in section 6, he shall be entitled to have the amount of the loss set off against his income, profits or gains under any other head in that year Provided that in computing the profits and gains chargeable under the head "profits and gains of business, profession or vocation", any loss sustained in speculative transactions which are in the nature of a business shall not be taken into account except to the extent of the amount of profits and gains, if any, in any other business consisting of speculative transactions Provided further that where the assessee is an unregistered firm . . . any such loss shall be set off only against the income, profits and gains of the firm and not against the income, profits and gains of any of the partners of the firm and where the assessee is a registered firm, any loss which cannot be set off against other income, profits and ganes of the firm shall be apportioned between the partners of the firm and they alone shall be entitled to have the amount of the loss set off under this section. Explanation I.--‑Where the, speculative transactions carried on are of such a nature as to constitute a business, the business shall be deemed to be distinct and separate from any other business .... (2) Where any assessee sustains‑a loss of profits or gains in any year, being a previous year . . . . in any business, profession or vocation, and the loss cannot be wholly set off under subsection (1), so much of the loss as is not so set off or the whole loss where the assessee had no other head of income shall be carried forward to the following year, and (i) where the loss was sustained by him in a business consisting of speculative transactions, it shall be set off only against the profits and gains, if any, of any business in speculative transactions carried on by him in that year ; . . . . . Provided that‑‑ . . . . . (c) nothing herein contained shall entitle any assessee, being a registered firm, to have carried forward and set off any loss which has been apportioned between the partners, under the proviso to subsection (1), or entitle any assessee, being a partner in an unregistered firm which has not been assessed under the provisions of clause (b) of subsection (5) of section 23, to have carried forward and set off against his own income any loss sustained by the firm ; . . . ." The first proviso to subsection (1) of section 24 has been construed by this Court in Keshavlal Premchand v. Commissioner of Income‑tax ((1957) 311 T R 7) and this Court has held that the language used m the said proviso is wider in its scope and the proviso itself is a substantive provision relating to the c6mpu tation of income under section 10 of the Act in respect of income, profits and gains of business, profession or vocation. The proviso provides that the loss sustained in speculative transac tions cannot be set off against income earned in any other business, but will have to be set off only against income earned in the speculative business. This Court further held that though it was a substantive provision, it was not altogether un connected with the principal provisions of subsection (1) of section
24. At page 16 of the report, Chagla, C. J. observed: "It is clear, therefore, on the language of the proviso itself and on the scheme of the Act, that the Legislature in enacting the so‑called proviso was enacting a substantive provision dealing with the mode of computing the profits and gains chargeable under the head `profits and gains of business, profession or vocation,' and what the Legislature provided was that when you compute these profits and gains, the loss sustained in a speculative transaction must not be taken into account except to the extent of the amount of profits and gains, if any, in any other business consisting of a speculative trans action. It is not as if the proviso has no connection whatever with section 24(1). In one sense it has, because what is available for being set off is the resultant profit or loss under section 24(1) and the proviso sets out the mode of arriving at the resultant profit or loss in the computation of profits and gains of a business, profession or vocation." It is clear that the speculative losses are not available for being set off against the profits and gains earned under other heads except if there be any profit in certain other speculative transactions. The question then is whether the speculative loss can be apportioned as amongst the partners of a registered firm. If they get apportioned amongst the partners under the second proviso to subsection (1), it is clear that proviso (c) to subsection (2) of section 24 provides that they are not available to the registered firm for being set off against its future income. Now, the argument advanced by Mr. Mehta in brief is that the first consequence of the aforesaid decision in Keshavlal's case is that the total income of an assessee registered firm chargeable to tax would not include loss in speculative business and the second consequence would be that the loss in speculative business would not be included in the income from business in respect of which a set‑off can be claimed under section 24 (1), and would not form part of the subject‑matter of that section. As speculative loss does not form part of the subject‑matter of subsection (1) of section 24, it therefore does not form part of the subject‑matter of the loss which gets apportioned under the second proviso to section 24 (1). Consequently, the speculative loss is available to a registered firm to be carried forward under section 24 (2). To accept the argument of Mr. Mehta would lead to the results entirely different than the intention of the Legislature clearly ‑ expressed in subsection (5) of section 23 of the Act, which as we have already stated is: whether it be profits earned or loss suffered by a registered firm in any assessment year, it has to be distributed as amongst its partners in accordance with their respective shares. The second thing is, it involves constru ing differently clauses substantially similarly worded in the second proviso to subsection (1) of section 24 and subsection (2) of section
24. The clauses to which we are referring are: "any loss which cannot be set off ‑against other income, profits and gains of the firm shall be apportioned between the partners of the firm" .occurring in the second proviso to sub section (1) of section 24, and the clause : "so much of the loss as is not so set off or the whole loss where the assessee had no other head of income shall be carried forward to the following year", occurring in subsection (2) of section
24. It is contended by Mr. Mehta that "any loss which cannot be set off against other income" in the second proviso to sub section (1) means loss other than the speculative loss, which cannot be set off because there is no income or sufficient profits under other heads to wipe it off, but the clause "so much of the loss as is not so set off" in section 24 (2) includes speculative loss which cannot be set off against the income of a registered firm under other heads. The argument is that the clause in the second proviso, being a clause in the proviso; has to be limited to the contents of subsection (1), speculative loss does not enter substantive provisions of subsection (1) and, therefore, the second proviso does not operate on it ; subsection (2) not being a proviso, it is not necessary to give such a limited meaning to the said clause. We find it difficult to accept that the necessary consequence or corollary of the decision of this. Court in Keshavlal's case is that the speculative loss does not form part of the subject matter of the substantive provisions of subsection (1) of section
24. It is indeed true that it has been held in Keshavlal's case that the first proviso to subsection (1) . of section 24 is a substantive provision relating to computation of profits and gains under section 10 of a "business, profession and vocation", but that does not mean that the said proviso has no connection whatsoever with the substantive provisions of sub section (1) of section 24, or does not act as a proviso thereto. In our opinion, but for the first proviso, the speculative loss would have been available to an assessee for being set off against his in come from other heads. Speculative transactions in the nature of a business carried on by an assessee are by reason of the Explanation to section 24 (1), deemed to be a distinct and separate business other than his other business. Speculative loss would, therefore, be a loss of profits and gains sustained by an assessee in a business which is distinct and separate from his other business. It may be that the said speculative loss is not taken into account in computing profits and gains of ,the business of an assessee other than the business in speculative transactions. But that only means that in the case of an assessee, carrying on business in speculative transactions as well as carrying on business other than speculative transactions computation of profits and gains would be in two parts‑(1) profits and gains of a business other than speculative transactions, and (2) loss in profits and gains of speculative transactions in the nature of a business. Loss sustained in speculative transactions none theless does not cease to be a loss sustained by an assessee in a business. Business is one of the heads of income under section 6 of the Act. Speculative loss sustained by an assessee would, therefore, fall within the clause ``loss of profits and again in any year under any of the heads mentioned in section 6" occurring in the substantive provisions of section 24 (1), and would have been available to the assessee for being set off against the profits under other heads but for the abridgement of the said right by reason of the provisions contained in the first proviso. It is in this sense that the first proviso acts as a proviso to the substantive provisions of subsection (1) of section
24. Chagla, C. J., at page 16 of the report in Keshavlal's case, observed: "It is true that the proviso, as we have construed it, does not deal with the abridgement of the right of the assessee to set off a loss under one head against profit under another head, but it does in one important sense abridge the right of the assessee to set of under' section 24 (1) and that abridgement consists, if one might so put it, in the quantum of profit or loss which can be set off, and the proviso really deals with the quantum of profit or loss on which the assessee can rely for the purpose of claiming a set‑off under section 24 (1) against another head. Therefore, although in the larger sense the proviso is a substantive enactment, it cannot be said that the Legislature in placing it after section 24(1) in the shape and form of a proviso has done something for which there is absolutely no justification." Further, what is spoken in subsection (2) is not something different than what is spoken in subsection (1) of section
24. It is necessary to read and construe the section as a whole. The section speaks of adjustment or set‑off of losses under one head against income and profits under other heads, and carrying forward of the unabsorbed loss in any business, profession or vocation to the following year. The manner in which the loss under one head is to be set off against profits under another head is provided in section 24(l). Loss under one head may not get set off against profits under another for reasons more than one. If there be no profits under other heads or no sufficient profits under other heads, the loss in its entirety or part cannot be set off. Similarly, loss, if it is a speculative loss, cannot be set off against the income of other heads by reason of the first proviso. It is such a loss which cannot be set off for one reason or another that is spoken of in sub section (2) as well as in the second proviso to subsection (1). If the speculative loss is not spoken of at all in or does not form part of the substantive provisions of subsection (1), we find it difficult how it can be taken to subsection (2). The clause in subsection (2) is: "and the loss cannot be wholly set off under subsection (1), so much of the loss as is not so set off". It would be reasonable to assume that the language indicates that the loss which can be carried forward has capacity or quality of being set off under the substantive provisions of sub section (1) of section 24, but are not set off on account of the other provisions in the section itself. If the speculative loss does not enter the substantive provisions of subsection (1) of section 24, it would not enter the provisions of subsection (2) as well. These are in brief our reasons why we find it difficult to accept Mr. Mebta's argument. But, however, we have already stated that, in, conformity with the general practice of this Court, we would with respect follow the decision of the Gujarat High Court in Commissioner of Income‑tax v. Kantilal Nathuchand. Mr. Joshi pointed out to us that we have in one case taken a view different from that of the Punjab High Court. It is indeed true that through inadvertence, we have departed from the uniform practice, the aforesaid decision of this Court reported in Maneklal Chunilal & Sons Ltd. v. Commissioner of Income‑tax, not having been brought to our notice. That, however, in our opinion; would not be a good ground for consciously departing from the uniform practice, especially in this case where after reviewing all the relevant provisions, a very elaborate judgment has been given by Bhagwati, J. and where more than one view is possible on the construction of this section. The relevant provisions of law have been, at page 425 of the report, described by the learned Judge as "The question is primarily one of construction and is certainly not free from difficulty, arising as it does on one of the least happily drafted sections in an Act not remarkable for perspicuity. It may be possible but we doubt whether it would be easy to compress into one single section more fertile opportunities for doubt and error:" In the result, our answer to the question is in the affirmative. No order as to costs. Question answered in the affirmative.