Speculative loss of a registered firm may be carried forward and set off only against later speculation profits.

Speculative loss of a registered firm excluded from current computation under the first proviso to section 24(1) of the Income-tax Act, 1922 was not required to be apportioned between partners. The second proviso to section 24(1) applied only to loss remaining after the principal clause and first proviso, so the phrase "any such loss" did not cover speculative loss kept outside computation. The scheme of section 24(2) and proviso (c) allowed such unabsorbed speculative loss to be carried forward and set off only against later speculation profits. The earlier speculative losses were therefore available for set-off against subsequent speculative profit.

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Issues: Whether speculation losses of a registered firm for earlier assessment years could be apportioned between the partners and, if not so adjusted, carried forward and set off against speculation profits of a later year under the Income-tax Act, 1922.

Analysis: Section 24(1) governs the computation and set-off of business losses against income under other heads, but its first proviso excludes losses from speculative transactions from being taken into account except against speculative profits. The second proviso to section 24(1) is confined to the loss that remains after applying the principal clause read with the first proviso, and the phrase "any such loss" does not extend to speculative loss kept outside computation by the first proviso. Section 24(2) and proviso (c) likewise proceed on the footing that speculative loss of a registered firm may remain unabsorbed and, if so, may be carried forward; they do not require such loss to be apportioned between the partners. The statutory scheme therefore supports the assessee's claim that the earlier speculative losses were not liable to apportionment and could be set off against subsequent speculative profits.

Conclusion: The question was answered in favour of the assessee, and the speculative losses of the earlier years were held available for set-off against the later speculation profit.

Ratio Decidendi: Under section 24 of the Income-tax Act, 1922, speculative loss of a registered firm excluded from current computation by the first proviso to section 24(1) is not a loss that can be apportioned under the second proviso, and such unabsorbed speculative loss may be carried forward and set off only against subsequent speculative profits under section 24(2).

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