Speculative loss set-off is confined to speculative profits under section 24(1), not ordinary business income.

The proviso to section 24(1) of the Indian Income-tax Act, 1922 was treated as a substantive rule for business-income computation: speculative losses could be adjusted only against speculative profits and not against ordinary business profits. The analysis emphasised that a proviso cannot be read so widely as to defeat the main provision or make the statutory restriction ineffective. On that basis, the assessee was held not entitled to set off speculative losses against non-speculative business income, and the interpretation favoured the Revenue.

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Issues: Whether loss from speculative business could be set off against profits from non-speculative business under the proviso to section 24(1) of the Indian Income-tax Act, 1922.

Analysis: The proviso to section 24(1) was treated as a substantive rule governing computation of business income. Its language restricted speculative losses to adjustment only against profits from speculative business and not against profits from ordinary business. A proviso cannot be expanded to defeat the clear effect of the main provision, and the statutory scheme showed that speculation is relevant only within the business head. Allowing set-off against non-speculative business income would render the proviso ineffective and contrary to its object.

Conclusion: The assessee was not entitled to set off speculative losses against income from non-speculative business, and the answer was against the assessee and in favour of the Revenue.

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