TMI Blog1960 (2) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... 4, accounting period ending 14th of March, 1953, the firm earned profits in its trading accounts but lost a sum of ₹ 20,206 in certain speculative transactions. This sum was sought to be set off against the profits earned in other business. The Income-tax Officer, the Appellate Assistant Commissioner and finally the Income-tax Appellate Tribunal, after a difference between the learned members who heard the appeal originally and a reference to a third member, all held that the loss in the speculative transactions cannot be set off against the assessee's profits in other trading business in the light of the first proviso contained in sub-section (1) of section 24 of the Income-tax Act. On the application of the assessee the Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able 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. The question which arises is whether this is a proviso which only comes into operation when the question arises under section 24 for setting off losses under one of the heads contained in section 6 against profits earned under other heads or whether it is intended also to apply when income is being computed under section 10 under the head profits and gains of business, profession or vocation . The main lin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the proviso in section 24(1) governs section 10 and modifies the manner of computation under that section. In both the cases the learned judges have taken the view that although the general principle of law is that the effect of a proviso is limited to the section in which it is included, there may be cases in which the language of the proviso is such that it clearly embodies a substantive enactment, and that is conceded even in the judgment of the Supreme Court relied on by the assessee in the present case, Commissioner of Income-tax v. Indo-Mercantile Bank Limited [1959] 36 ITR 1 (SC) where the general principle is restated with the qualification, unless the language used expressly or by necessary intendment leads to that conclusion, ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose of section 24(1) because that had already been done under section 10(2). If it was intended to convey by the proviso that the resultant loss in the business had to be ascertained, then the language used by the Legislature would have been very different from the language actually used. Mr. Palkhivala wants to para phrase the proviso to mean that in the loss suffered in a business if there is any loss due to a speculative transaction then that loss cannot be set off against another head. Now, to do this is not to paraphrase the proviso but to rewrite it and to substitute an entirely different provision for what the Legislature has done. It is clear therefore, on the language of the proviso itself and on the scheme of the Act, that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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