Speculative loss set-off restricted in business income computation; losses could not be adjusted against non-speculative brokerage profits.

Speculative jobbing losses could not be adjusted against brokerage profits in computing business income because the first proviso to section 24(1) was treated as a substantive restriction on the computation of business profits under section 10. On that construction, speculative losses are excluded at the computation stage except to the extent of speculative profits from other speculative business, so they cannot be set off against non-speculative business income of the same year. The reference was answered against the assessee and in favour of the Revenue.

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Issues: Whether loss sustained in speculative jobbing transactions could be adjusted against profits from brokerage business while computing business income under section 10, in view of the first proviso to section 24(1).

Analysis: The relevant scheme of the Income-tax Act distinguishes between computation of profits and gains under the head of business under section 10 and the later question of set-off under section 24. The proviso to section 24(1), as amended, was construed as a substantive restriction governing the mode of computation of business profits and gains, so that speculative losses are excluded at the stage of computing business income except to the extent of speculative profits from other speculative business. On that construction, the proviso does affect the quantum available for set-off, and the loss from jobbing transactions cannot be carried into the brokerage profits of the same period.

Conclusion: The loss in speculative jobbing transactions was not adjustable against brokerage profits; the answer to the reference was against the assessee and in favour of the Revenue.

Final Conclusion: The proviso to section 24(1) was held to operate as a substantive limitation in the computation of business income, excluding speculative losses from adjustment against non-speculative business profits.

Ratio Decidendi: In computing business income, speculative losses are to be excluded by force of the proviso to section 24(1), and they cannot be set off against profits from non-speculative business carried on in the same year.

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