TMI Blog1968 (9) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... er, on the facts and in the circumstances of the case, the sum of Rs. 78,749, which was deemed to be the profits and gains of business under section 10(2A) of the Income-tax, Act, can be said to be arising from speculative business ? " The assessee carried on both speculative as well as non-speculative business. The system of account regularly employed being mercantile, any liability for payment of difference on account of speculative transactions is allowed as a deduction in computing the profit or loss in speculative business. At the commencement of the accounting year relevant for the assessment year 1955-56, i.e., July 1, 1953, there was a balance of such liabilities for speculation differences in the account of one Ramnath Narendran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty related to the particular business, the income could only be construed as arising from that business. The Tribunal negatived this contention. According to it the effect of the provision of section 10(2A) of the Act is that it charges the amount to tax by its own force as a business income. " The income character of the receipt is designated by the fiction of law and it is to be brought under assessment as an income from business without any further categorisation. It cannot, therefore, be said that this income arose to the assessee from any speculation business. It is treated as business income only by virtue of the specific provision made in this regard ". The High Court referred to the decision of this court in Donald Miranda v. Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Income-tax Act. 1961, was to catch cases of remission of debt by creditors in respect of earlier trading items which were allowed as deduction. As pointed out by the High Court, in the present case, if a portion of the loss or liability incurred by the assessee in a particular year is subsequently diminished by way of remission or otherwise, section 10(2A) creates a fiction and directs that the remission or the diminution shall be deemed to be profits and gains of business, profession or vocation and to have accrued or arisen during the relevant previous year. The contention of the assessee, however, was that the fiction should be carried a step further and if the loss in respect of which the portion was remitted was a speculative loss th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 12(1) of the Excess Profits Tax Act and when it or a portion of it was refunded it had to be treated as income of the assessee. When it was deposited with the Central Government it was a portion of the profits of the business of the assessee and when it was returned to the assessee it must be restored to its character of being a part of the profits of a business. It cannot be said that its nature changes merely because it is refunded as a consequence of some provisions in the Finance Act or the Excess Profits Tax Ordinance. Its nature remains the same. The effect of the deposit under the Acts above mentioned was as if a slice of the business profit was taken and deposited with the Central Government Treasury and then when it was foun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not have arisen but for the fact that in the speculative business the assessee had claimed deductions on account of liabilities for speculation differences. There is a good deal of force in the point of view pressed on behalf of the appellant that under the provisions of section 24 of the Act the profit or loss which is computed has to be categorised as either speculative profit or loss or non-speculative profit or loss. If once a particular item of loss is categorised as speculative loss then, in that case, if such loss is to be deemed to be income or profit from the business, profession or vocation by virtue of the provisions of section 10(2A) it follows by necessary implication that such income or profit can only be income or profit a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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