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TMI Blog1968 (9) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee 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 Narendranath amounting to Rs. 83,049. Out of this liability the assessee had paid to the party a sum of Rs. 7,825 in cash. The balance of Rs. 75,224 along with a sum of Rs. 3,525 being similar liability due to other two creditors aggregating Rs. 78,749 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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. Commisssioner of Income-tax, but held that there was no warrant for saying that the remission of a speculative liability should be treated as speculative income accruing to the assessee. The decision of this court was distinguished on the ground that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the notional profits and gains of business which came into existence by the fiction of the section should be categorised as speculative income. Now it is difficult to understand how the fiction should not be carried to its logical conclusion by necessa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 found that a larger amount had been deposited than was exigible a portion of it was returned. By being put in a Government Treasury it does not cease to be what it was before, i.e., profits of a business." Keeping in view the entire process by which remi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 arising from speculative business. Moreover, section 10(2A) envisages that the deemed income which is sought to be taxed should be considered to have arisen from the same business in which the loss that had been incurred was written back. It would be highly ..... X X X X Extracts X X X X X X X X Extracts X X X X
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