Capital loss on investment debentures cannot be set off as income loss under the 1922 tax law.

Loss on debentures acquired as an investment, and not as part of a money-lending business, was treated as a capital loss rather than a loss of profits or gains under the heads of income. Because the factual findings showed no connection with the assessee's business, the loss could not be set off under Section 24(1) of the Indian Income-tax Act, 1922. Section 8 on interest from securities did not provide any allowance for such a capital loss. The reference was answered against the assessee and in favour of the Revenue.

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Issues: Whether the loss suffered on debentures acquired for investment, and not in the course of money-lending business, could be treated as a loss of profits or gains under the heads of income and set off against income under another head under Section 24(1) of the Indian Income-tax Act, 1922.

Analysis: The assessee's claim depended on showing that the debentures were acquired as part of a money-lending business. The findings of fact bound the Court, and those findings were that the transaction had no connection with the assessee's money-lending business. On that basis, the debentures represented an investment of capital rather than a loan transaction in the course of business. A loss arising from such investment is a capital loss and cannot be brought within Section 24(1) as a loss of profits or gains under the heads of income in Section 6. The special treatment of interest on securities under Section 8 also did not create any allowance for such a capital loss.

Conclusion: The loss was not allowable as a set-off against income under the Indian Income-tax Act, 1922, and the answer to the reference was in the negative, in favour of the Revenue.

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