Vested right to carry forward speculation loss survives prospective amendment; brought-forward set-off remained available.

An accrued right to carry forward and set off speculation loss was treated as a vested substantive right, and the later amendment reducing the carry-forward period from eight assessment years to four operated prospectively. Because the amendment did not expressly or by necessary implication extinguish losses computed for earlier years, section 73(4) was held to preserve the assessee's pre-existing entitlement. The provision was also read as governing carry forward to future years, not the set-off of loss already brought forward from prior years. The disallowance was therefore unsustainable, and the assessee was entitled to set off the brought-forward speculation loss against speculation profits in the year under consideration.

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Issues: Whether the assessee had a vested right to carry forward speculation loss computed for assessment year 2001-02 for eight subsequent assessment years and to set it off against speculation profits in assessment year 2006-07 notwithstanding the amendment to section 73(4) of the Income-tax Act, 1961.

Analysis: The right to carry forward and set off speculation loss was treated as an accrued and vested right. Such a right can be taken away only by express language or by necessary implication. The amendment made by the Finance Act, 2005 merely substituted the period of carry forward from eight assessment years to four assessment years from assessment year 2006-07 onwards; it did not expressly or impliedly extinguish rights already accrued in respect of losses computed for earlier years. The provision in section 73(4) was also held to deal with carry forward of loss to future years and not with the set-off of loss brought forward from earlier years. The principle was supported by the law governing saving of accrued rights on repeal or amendment.

Conclusion: The assessee's right to carry forward and set off the speculation loss for assessment year 2001-02 survived the amendment, and the disallowance was unsustainable.

Final Conclusion: The appeal succeeded and the assessee was entitled to set off the brought-forward speculation loss against the speculation profits for the year under appeal.

Ratio Decidendi: An accrued right to carry forward and set off speculation loss is a vested substantive right which is preserved unless taken away expressly or by necessary implication, and a later amendment reducing the carry-forward period operates prospectively.

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