TMI Blog1967 (2) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... m 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, he allowed the entire amount of Rs. 53,008 as a bad debt without applying his mind to the question as to whether the amount of Rs. 19,453, which represented a part of the bad debt relating to the speculative transactions, would not be allowable in view of the provisions of the first proviso to section 24(1) of the Act. In the course of the assessment for the assessment year 1955-56, when the Income-tax Officer had to examine a similar bad debt claim, he realised that he had erroneously allowed an amount of Rs. 19,453 as bad debt in the earlier assessment year. He, therefore, reopened the assessment under section 34(1)(b) and disallowed the sum of Rs. 19,453 in the computation of the total income for that year and allowed it to be carried forward as a part of the speculative loss for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim in respect of the bad debt only to the extent of Rs. 35,320. The question of law which it has referred to us as arising out of its order, is whether, on the facts of the case the sum of Rs. 35,320, being a debt in relation to speculative transactions, falls within the scope of section 24(1), first proviso. It will thus be seen that there is a common question of law referred to in respect of both the assessments. In respect of the assessment for the assessment year 1959-60, there is an additional question relating to the validity of the action under 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 R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng set off against the profits and gains in non-speculative business, but that it can only be set off against profits in any other business consisting of speculative transactions. In other words, what the proviso says is that when profits and gains are to be computed under the head of " business ", if an assessee has different kinds of businesses, all of which are of a non-speculative nature, his total income will be computed after setting off the profits and losses against one another in the different businesses. Thus, if he has five distinct lines of businesses, in three of which he earns a profit and in the other two he sustains a loss, the loss would be set off against the profits in the computation of the total income under the head of " business ". Similarly, if the assessee had different kinds of speculative businesses, his income under the head of " business " will be computed after permitting a set-off of the profits and losses in the different kinds of businesses. Where, however, an assessee has both speculative and non-speculative businesses, one or more than one of each kind, the losses in the speculative businesses of one kind can only be set off against profits, if an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion with speculative business. We do not think that that is the correct interpretation. The expression " any loss sustained 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 that it constitutes the loss in the business in the year in which it becomes bad, it would come within the expression of a " loss sustained in speculative transactions which are in the nature of a business " within the meaning of the proviso to section 24(1). This would also answer, in our opinion, the other argument advanced by t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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