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TMI Blog1983 (1) TMI 126X X X X Extracts X X X X X X X X Extracts X X X X ..... setting off of carried forward business loss of the assessment year 1974-75 against income from speculation business earned during the assessment year. The ITO did not accept the claim as in his view the carried forward business loss could be set off only against any other business income and that as per Explanation 2 to section 28 of the Income-tax Act, 1961 (' the Act '), the income from speculation transaction shall be deemed to be distinct and separate from any other business. Against the action of the ITO, the assessee preferred appeal before the Commissioner (Appeals) contending that the speculation business was a distinct business, yet the assessee rightly claimed for setting off of income from speculation business against brought f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that in a broad analysis of the intention of the Legislature in treating such speculation business as a distinct entity, it was possible to demarcate this speculation business as a separate stream altogether, in respect of which the loss sustained was to be set off against future profit obtained in such business. He observed that in case the profit so derived was set off against losses from other head of income, the separate and distinct entity of such business would be obliterated, and such a construction would run counter to the inherent intention of the legislature to keep such separate and distinct entity totally out of the sphere of consideration of carry forward and set off all other business losses. Under such circumstances, the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs of the Paper Book in order to stress his point of arguments. Briefly speaking, it is urged that the claim of the assessee being proper and valid, the orders of the authorities below may be cancelled and the claim should be allowed in full. 6. On the other hand, the learned departmental representative supports the order of the Commissioner (Appeals). We have perused the orders of the authorities below along with other papers placed before us for our consideration. From the facts as borne out from orders of the authorities below, it is seen that the assessee has been carrying on speculation activities for quite some years, as a separate business. In fact, from the computation of income made by the ITO, it is seen that the income from spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istinct and separate from any other business, if such transactions are of such a nature so as to constitute a business of the assessee. To our mind, the interpretation should be limited to the purpose for which it was intended. In this connection, we may refer to the decision of the Hon'ble Supreme Court of India as reported in CIT v. Cocanada Radhaswami Bank Ltd. [1965] 57 ITR 306, with reference to page 312, in which it was held inter alia, that it is well-settled that a legal fiction is limited to the purpose for which it is created and should not be extended beyond its legitimate field. 7. Section 72(1) provides setting off of brought forward business losses against profit and gains, if any, of any business or profession carried on by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax and that section 6 of the 1922 Act classified the taxable income under different heads for the purpose of computation of the net income of the assessee. It was also observed that though, for the purpose of computation of the income, interest on securities is separately classified, income by way of interest from securities does not cease to be part of income from business, if the securities are part of the trading assets. It was also held, whether a particular income is part of the income from a business falls to be decided not on the basis of the provisions of section 6 but on commercial principles. The facts of that decided case were similar to the facts of the case before us. 9. Having regard to the entire facts and circumstances of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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