Speculative loss treated as business loss where forward contracts formed part of one mercantile business.

Speculative transactions formed part of the assessee's single mercantile business, with common capital, mixed accounts, and no separate speculation establishment, so they were not treated as an independent undertaking. On those facts, the speculative loss was a business loss eligible for carry forward and set-off against profits of later years. The departmental view treating speculation as a separate business was rejected, and the assessee's entitlement was affirmed.

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Issues: Whether the assessee was entitled to carry forward and set off the speculative loss of the registered firm against the profits of subsequent years under the provision governing carried-forward business losses.

Analysis: The decisive question was whether the speculative dealings formed a separate business or were only a branch of the merchants' existing business. On the findings recorded, the firm carried on a single trading business, used common capital, maintained mixed accounts, and had no separate establishment for speculation. The speculative forward contracts were treated as part of the ordinary mercantile activity and not as a distinct undertaking. The departmental authorities had proceeded on an legal approach by treating the speculation as an independent business on the facts found.

Conclusion: The assessee was entitled to carry forward the loss and set it off against the profits of the later years, and the question was answered in the affirmative in favour of the assessee.

Ratio Decidendi: Where speculative transactions are carried on as part of the same mercantile business and not as a distinct independent business, the loss is a business loss eligible for carry forward and set-off under the relevant provision.

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