TMI Blog1956 (9) TMI 70X X X X Extracts X X X X X X X X Extracts X X X X ..... deals with set off of a loss in computing aggregate income and, as is now well settled, the scheme of that section is to entitle an assessee to claim a set off in respect of a loss under one head against a profit under another head, and the proviso to that section which was incorporated in the Income-tax Act in 1953 is to the following effect: Provided that in computing the profits and gains chargeable 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. Mr. Palkhivala's contention is that this section only refers to a case where an assessee is claiming the right to set off a loss which he has suffered under one head against a profit which he has earned under another head. This section has no application when the assessee wishes to adjust or set off a loss against a profit under the same head, and the whole of Mr. Palkhivala's argument is this that, as in this case the assessee in claiming 'to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Murlidhar Mathurawalla Association [1948] 16 ITR 146 , where we were considering a different proviso to section 24(1), and in that judgment we pointed out that the proviso can have no application unless in the first place the section itself was applicable. What was sought to be contended there, was that section 24(1) did not merely apply to a set-off as between two different heads, but it also applied to a set-off in respect of the same head. We rejected that contention pointing out that the language of the proviso which we were construing was capable of being construed so as to bring it within the field covered by the section itself, and we also sounded a note of warning that a section cannot be construed in the light of the proviso to that section, because really the attempt of the Taxing Department was to extend the scope of section 24(1) by asking us to look at the language of the proviso. This decision of ours has been followed by various High Courts. The Nagpur High Court has followed it in Mohanlal Hiralal v. Commissioner of Income-tax [1952] 22 ITR 448, and in Commissioner of Income-tax v. C.P. Syndicate [1952] 22 ITR 493. The Punjab High Court has followed it in Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ointed out this fallacy, and have refused to be led astray by arguments such as those which have been addressed to us, which depend solely on taking words absolutely in their strict literal sense disregarding the fundamental consideration that they appear in a proviso. The learned author also refers to the case of Dormer v. Newcastle-upon-Tyne Corporation [1940] 2 K.B. 204, where, although the section of the Act was to the effect provided that nothing in the Act shall authorise the corporation of Newcastle-on-Tyne to commit a nuisance , the proviso was read in a restricted sense and it was held that it was only a proviso to a group of sections which preceded the section in which the proviso appeared and was not a proviso to the whole enactment. Now, really, there is no dispute about the principles for which Mr. Palkhivala is contending and undoubtedly the Legislature having enacted a proviso to section 24(1), prima facie, we must look upon it as a proviso and not as a substantive enactment. Therefore, our first effort must be to see whether this enactment can be fitted in appropriately with the language of the section itself so as to constitute a proviso. It is only when w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder one head, the loss having been arrived at in the manner of computation laid down in Chapter III, and there is a profit under another head, the profit having been arrived at in the manner laid down in Chapter III. Therefore, it is impossible to accept Mr. Palkhivala's contention that when the Legislature referred in the proviso to the computation of profits and gains chargeable under the head profits and gains of business, profession or vocation , the Legislature was referring to the loss to be ascertained for the purpose of a set-off under section 24(1). It was entirely unnecessary to compute the profits and gains of a business, profession or vocation for the 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 paraphrase 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 no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he fact that in recent times businessmen have been known to buy speculative losses in order to reduce their profits and clearly the Legislature was aiming at that mischief and that mischief could only be removed by preventing the assessee from reducing his profits by these speculative losses, and that is exactly what the Legislature has done in enacting the proviso. Mr. Palkhivala drew our attention to the anomaly of the Taxing Department taxing the gains of a speculative business and not giving any reduction for speculative losses. Apart from the fact that the taxing statute is full of anomalies, we do not think that in this particular case the anomaly is very serious. If, as we have already pointed out, the object of the Legislature was to prevent this buying of speculative losses in order artificially to reduce profits, then whatever anomaly it might have created, the only way the mischief could have been defeated was by enacting the proviso in the manner in which the Legislature has done. In our opinion, therefore, the Tribunal was right when it held that the assessee was not entitled to deduct the sum of ₹ 19,723 being the losses from speculation, from its business pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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