V.S. Desai, J.
1. This reference under section 66(1) of the Indian Income-tax Act, 1922, arises out of the assessee's assessment for the assessment year 1958-59, the relevant accounting year being the financial year ending on the 31st March, 1958. The assessee is a Hindu undivided family. It has income from property, business in shares both ready and forward, dividends and shares of profit from the registered firm of Mahadevia Brothers. For the assessment year 1958-59 the assessee's income from business was assessed in the sum of Rs. 47,987. In the said assessment year the assessee had incurred a loss of Rs. 2,29,597 in its speculative business. The assessee claimed to set off the said loss against its profits from the non-speculative business. The claim was disallowed by the profits from the non-speculative business The claim was disallowed by the Income-tax Officer relying on the first proviso to section 24(1) read along with the Explanations to the said proviso. It was contended by the assessee that the first proviso to section 24(1) did not apply to a case of computation of the business income under section 10 and consequently the assessee was entitled to have the total income of all the different business carried on by it under a single head of 'business' under section 10. The contention, however was negatived by the Income-tax Officer relying on the authority of this court in Keshavlal Premchand v. Commissioner of Income-tax and Appellate Assistant Commissioner in appeal confirmed the said view.
2. For the purpose of carrying on the speculative business during the assessment year, the assessee had borrowed moneys on which it had paid a total interest of Rs. 16,200. The assessee claimed that this was an expenditure of business deductible under section 10 and must, therefore, be allowed to the assessee as a business expenditure in the computation of the business profits of the assessee as a whole. It was argued on its behalf that the first proviso to section 24(1) did not disentitle the assessee to have this item of expenditure deducted from the profits of the other business because what was not allowed to be set off under the said proviso was only the loss in speculative transactions carried on in the nature of the said business. This contention did not prevail with the Income-tax Officer and the Appellate Assistant Commissioner who took the view that the expenditure, having been admitted incurred in connection with the total loss or profits in the speculative business and would form a part of the profit or loss of the said business either by augmenting the losses in that business if there are losses or by reducing the profits, if there be profits. According to the Income-tax Officer and the Appellate Assistant Commissioner, therefore, this item of Rs. 16,200 also could only be allowed to be added to the speculative loss and the total loss allowed to be carried forward to be adjusted against the speculative profits in the subsequent years.
3. The assessee appealed to the Tribunal against the order passed by the Income-tax Officer and confirmed in appeal by the Appellate Assistant Commissioner. Both the contentions, which it had urged before the department authorities, were also agitated before the Tribunal. On the first contention the Tribunal agreed with the view taken by the Income-tax Officer and the Appellate Assistant Commissioner and held that, in view of the binding authority of keshavlal Premchand v. Commissioner of Income-tax, the assessee was not entitled to set off Rs. 2,29,597 against other business income failing under section 10 of the Act. As to the second continuities, however, it disagreed with the view taken by the department authorities. According to the Tribunal what cannot be allowed to be set off under the first proviso to section 24(1) read along with the two Explanations against the profits and gains of the non-speculative business is only a loss sustained in speculative transactions, which are in the nature of business. What was sought to be claimed by the assessee in the present case was not a loss sustained in speculative transactions, which were carried on in the nurture of business, but the payment of interest, which was an item of expenditure. In the opinion of the Tribunal, there was no express inhibition against allowing an expenditure like salaries of staff, interest, payment of rent for building, and it must, therefore, be held that the assessee was entitled to claim as a deduction out of its business profits the interest paid by it as an expenditure of business. In that view of the matter, the Tribunal held that the assessee must be allowed to set off the amount of Rs. 16,200 against the business income. The Tribunal thus allowed the appeal partly disallowing the assessee's claim to set off an amount of Rs. 2,29,597 and allowing it to the extent of its claim to set off the amount of Rs. 16,200 against its business income. Both the assessee and the department applied under section 66(1) of the Income-tax Act for a reference and the Tribunal drew up a statement of the case and referred to this court the following two questions :
'1. Whether, on the facts and in the circumstances of the case, in computing the income from business assessable under section 10, the loss in speculative transactions either in whole or to the extent of the other business income, could be set off against other business income regard to the proviso to section 24(1
2. Whether, on the facts and in the circumstance of the case, the interest or Rs. 16,200 paid by the assessee on money borrowed admittedly for speculative transactions is allowable in the computation under section 10, as an expenditure against business profit ?'
4. So far as the first questions is concerned, the answer to the same must be against the assessee in view of the decision of this court in Keshavlal Premchand v. Commissioner of Income-tax, which has been followed then after in a large number of decisions of several other High Courts in India. In view of the overwhelming position of the case law against him, Mr. Palkhivala, the learned counsel for the assessee, has not pressed in same question without abandoning his contention that the decision of this court in Keshavlal Premchand v. Commissioner of Income-tax and the decisions of the other courts, which followed it, are not correct and would be required to be reconsidered. He has, however, fairly accepted the position that no useful purpose would be served by his arguing against that said decisions before this court, because, having regard to the long course of decisions, we will not depart from the view taken in the said decisions even if it were shown that there was something arguable against the said view.
5. As to the second question, in our opinion, the view taken by the Tribunal is not correct. As we have held in a resent case in Income-tax Reference No. 37 of 1962, decided on 8th February, 1967, a on a proper interpretation of the first proviso read along with the two Explanations, speculative transactions carried on in the nature of business constitute a distinct and separate business, the income of which is required to be computed under section 10. The loss in speculative transactions carried on in the nature of business referred to in the first proviso to section 24 is the net computed loss under section 10 of the speculative business which is constituted of the speculative transactions carried on in the nature of business. The amount of Rs. 16,200 is admitted interest paid on amounts borrowed for the purpose of carrying on the speculative transactions in the nature of business or, in short, the speculative business. This is an item which will come in for computation of the profit to loss of the speculative business but cannot enter the computation of the profit and loss of the non-speculative business. Since the speculative business has suffered as loss this item which belongs to the speculative business will further argument the loss and will form part of it. The amount of Rs. 16,200, in our opinion, therefore, ask cannot qualify for being allowed against the income from the non-speculative business. Mr. Palkhivala contended that the expression 'any loss sustained in speculative transactions which are in the nature of a business' used in the first proviso to section 24(1) can only relate to the loss sustained in the transactions themselves and not the net loss on a computation of the profits and loss under section 10 of the Act. We are not inclined to accept that interpretation because in our view the loss referred to is the net computed loss and not merely the gross loss on the transactions. The proviso which occurs in a provision, which relates to the set-off adjustment of the losses and profits under different heads of income, itself deals with the set-off of profits and losses of different kinds of business under the head of profits and gains of business. The question of set-off arises only when the loss or profit is computed under the Act. In the context of the provision of section 24, we are of the view that the loss spoken of by the first proviso relates to the resultant loss on computation and not merely loss incurred in the transactions.
6. In the result, therefore, our answers to both the questions referred to us are in the negative. The assessee will pay the costs of the Commissioner.
7. Questions answered in the negative.