Speculative losses cannot be offset against ordinary business income where the proviso limits set-off to speculative profits.

Speculative losses were held not to be set off against other income or ordinary business profits, because the second proviso to section 24(1) of the Income-tax Act, 1922 excluded such losses except to the extent of speculative profits. The Court rejected the assessee's argument that the claim was only an adjustment of business loss under section 10, holding that the proviso controlled the computation of business income as well as the set-off rules. The placement of the proviso in section 24(1) did not confine its operation to that section alone. The reference was answered against the assessee and in favour of the Revenue.

---

---

Issues: Whether a loss arising from speculative transactions could be set off against other income of the assessee, having regard to the second proviso to section 24(1) of the Income-tax Act, 1922.

Analysis: The assessee contended that the claim was not one for set-off under section 24(1), but only for adjustment of a business loss against business profits under section 10. The Court held that the second proviso to section 24(1) governs the computation of business profits as well, because it directs that speculative losses be excluded except to the extent of speculative profits. The placement of the proviso under section 24(1) did not limit its operation to that section alone, and the proviso was treated as controlling the mode of computation under section 10.

Conclusion: The speculative loss could not be set off against the assessee's other income, and the answer to the reference was against the assessee and in favour of the Revenue.

Ratio Decidendi: A proviso may operate as a substantive restriction on the computation of business income where its language and scheme require that speculative losses be excluded except against speculative profits.

---