Speculative losses cannot be set off against non-speculative business profits where the statute excludes them from business computation.

Speculative transactions were treated as a distinct business for income-tax computation, and the first proviso to section 24(1) barred speculative losses from being deducted against ordinary business profits except to the extent of speculative gains. The statutory language was held to be clear and left no room for adjusting speculative losses against non-speculative business income under section 10. The principle stated was therefore applied against the assessee and in favour of the Revenue.

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Issues: Whether speculative losses sustained in a business were capable of being set off against profits from non-speculative business under section 10, notwithstanding the first proviso to section 24(1) of the Income-tax Act, 1922.

Analysis: The statutory scheme treated speculative transactions as a distinct and separate business for purposes of computation. The proviso to section 24(1) expressly directed that losses in speculative transactions should not be taken into account in computing profits and gains under the head of business, except to the extent of profits from other speculative business. The language of the proviso was held to be clear and unambiguous, leaving no room for treating speculative losses as deductible against ordinary business profits under the same head.

Conclusion: The issue was decided against the assessee and in favour of the Revenue; speculative losses could not be set off against non-speculative business profits.

Ratio Decidendi: Where the statute expressly excludes speculative losses from computation under the business head except to the extent of speculative profits, such losses cannot be adjusted against profits of non-speculative business.

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