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TMI Blog1967 (2) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... aid computation a sum of Rs. 53,008, which was claimed as a bad debt in the account of one Gopaldas Champshi, was allowed by the Income-tax Officer. This amount of Rs. 53,008 included a sum of Rs. 19,453 which represented the valan profits made by the assessee in certain speculative transactions in the Samvat year 2011 and were due to it from the said Gopaldas Champshi and were, therefore, debited to his account. They were, however, not realised and ultimately in the relevant accounting year they were written off and claimed as bad debt along with the other dues from the said debtor. Since the assessee's claim that the debt due from Gopaldas Champshi had become recoverable and, therefore, a bad debt was accepted by the Income-tax Officer, h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e action under section 34(1)(b) is valid in law ? 2. Whether the sum of Rs. 19,453, being a debt in relation to speculative transactions, falls within the scope of section 24(1), first proviso, of the Income-tax Act ?" In the assessment for the assessment year 1959-60, the assessee claimed an amount of Rs. 43,541.44 as a bad debt in the account of one Madhavji Vithaldas. This amount represented the balance due to the assessee from the said Madhavji Vithaldas, in respect of certain speculative transactions entered into by the assessee with him in the Samvat year 2011. The dues having become irrecoverable, the assessee had written them off in the relevant accounting year and claimed them as a bad debt in the assessment. The Income-tax Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 34(1)(b). Mr.Mehta appearing for the assessee has not pressed for an answer on the first question for the assessment year 1959-60 relating to the validity of section 34(1), conceding that we may answer the question against him. We accordingly answer that question in the affirmative. As to the second question, the main argument of Mr. Mehta is that the proviso to section 24(1) had no application to any part of the amount which the assessee had claimed as bad debt in the relevant accounting years. He does not dispute that the amount of Rs. 19,453 involved in the assessment for the first assessment year and the amount of Rs. 43,541 involved in the second assessment year related to dues on speculative transactions. His argument, howev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the amount of profits and gains, if any, in any other business consisting of speculative transactions..... Explanation 1.-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." Under the main provisions of sub-section (1), a loss under one head is allowed to be set off against profits or gains under any other head in that year. The first proviso confines itself to the computation of the profits and gains chargeable under the head " Profits and gains of business, profession or vocation " and provides that, so far as the speculative transactions which are in the nature of business are concerned, any loss sustained in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ars as losses of those years and, since the amounts pertained to transaction in the course of the speculative business, treated them as speculative losses. Since in the first year there was no speculative profit against which it could be allowed to be set off, it allowed the entire amount to be carried forward to the subsequent year and in the second year since only a part of it could be set off against the profits available during that year, it allowed a set-off to that extent and directed that the rest should be carried forward to the subsequent years. Mr. Mehta's argument is that the department has erred in treating it as a loss sustained in speculative transactions. His argument is that the amount claimed as a bad debt may be a loss in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined in speculative transactions which are in the nature of a business " contemplates the resultant computation of loss or profit in the business in which the speculative transactions are entered into and not the aggregate of losses sustained in such of the transactions as have resulted in a loss. As we have already pointed out, what the provision contemplates is that where there are businesses consisting of speculative transactions carried on by the assessee, the loss or profit in one kind of business can be adjusted against the loss or profit in another kind of business, but a set-off of losses in speculative businesses will not be allowed against profits from business which are not speculative. If the bad debt is allowed on the footing t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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