TEK CHAND J. - These are two income-tax references under section 66 (1) of the Income-tax Act and may be disposed of by one order as the questions referred to this court are identical, the only distinction being that the two references relate to two different assessment years. Income-tax Reference No. 9 of 1961 is concerned with the assessment year 1953-54 and the accounting period ending 30th June, 1952. The loss which the assessee sustained in this year is Rs. 33,082. Income-tax Reference No. 10 of 1961 relates to the assessment year 1955-56 for the corresponding accounting year ending 30th June, 1954. During this period the loss sustained by the assessee is stated to be of the value of Rs. 26,632.
The assessee is a company carrying on the business of running factories for ginning and pressing cotton and for manufacturing oil and gram dal. During the two years under consideration the assessee was carrying on speculative transaction in forward buying and selling of sarson. In these speculations the assessee sustained a loss of Rs. 33,082 and of Rs. 26,632 in the two periods. In computing the total income from business for each of the two years the assessee claimed that it was entitled to set off the losses in speculative transactions suffered in each of the two years under consideration against profits from non-speculative business. This contention of the assessee was repelled by the Income-tax Officer, by the Appellate Assistant Commissioner and finally by the Income-tax Appellate Tribunal. The income-tax authorities maintained that the assessee was not entitled to claim this set-off losses in speculation against income from non-speculative business. The Appellate Tribunal followed the dictum in Keshavlal Premchand v. Commissioner of Income-tax. In this decision it was held that the assessee was not entitled to claim the set-off losses in speculative transactions against profits from non-speculative business. On the above facts the following question of law was referred for this courts opinion :
'Whether on a true interpretation of the proviso to sub-section (1) of section 24 of the Indian Income-tax Act, the losses of Rs. 33,082 and Rs. 26,632 suffered by the assessee in speculative transactions in the assessment years 1953-54 and 1955-56 respectively could be set off against profits from non-speculative business ?'
In the statement of facts it was stated by the assessee that the applicant company is a resident company owning a ginning and pressing factory, and oil, dal and rice mills. The applicant company is a member of the Satta Chamber known as the Punjab Company Ltd., Bhatinda. In its capacity as a member the applicant engages in transactions, which are settled by difference in rates. It is then stated that these transactions were done in sarson, cotton seeds, gwara and other commodities. The assessee further maintained that the activity was an integral part of the activity connected with raw material required in the ginning and oil crushing scheme of the assessee company and was thus covered by the exceptions to section 24 (1) and also that the claim becomes admissible, if the business income was computed under section 10 of the Income-tax Act.
For facility of reference sub-section (1) of section 24 of the Income-tax Act is reproduced in extenso :
'24. Set-off loss in computing aggregate income. - (1) Where any assessee sustains a loss of profit or gains in any year under any of the heads mentioned in section 6, he shall be entitled to have the amount of the loss set off against his income profits or gains under any other head in that year :
Provided that in computing the profits and gains chargeable under the head profits and gains of business, profession or vocation, any loss sustained in speculative transactions which are in the nature of a business shall not be taken into account except to the extent of the amount of profits and gains, if any, in any other business consisting of speculative transactions :
Provided further that where the assessee is an unregistered firm which has been assessed under the provisions of clause (b) of sub-section (5) of section 23, any such loss shall be set off only against the income, profits and gains of the firm and not against the income, profits and gains of any of the partners of the firm, and where the assessee is a registered firm, any loss which cannot be set off against other income, profits and gains of the firm shall be apportioned between the partners of the firm and they alone shall be entitled to have the amount of the loss set off under this section.
Explanation 1. - Where the speculative transactions carried on are of such a nature as to constitute a business, the business shall be deemed to be distinct and separate from any other business.
Explanation 2. - A speculative transaction means a transaction in which a contract for purchase and sale of commodity including stocks and shares is periodically or ultimately settled otherwise than by the actual delivery or transfer of the commodity or scrips :
Provided that for the purposes of this section, -
(a) a contract in respect of raw materials or merchandise entered into by a person in the course of his manufacturing or merchanting business to guard against loss through future price fluctuations in respect of his contracts for actual delivery of goods manufactured by him or merchandise sold by him; or
(b) a contract in respect of stocks and shares entered into by a dealer or investor therein to guard against loss in his holdings of stocks and shares through price fluctuations; or
(c) a contract entered into by a member of a forward market or a stock exchange in the course of any transaction in the nature of jobbing or arbitrage to guard against loss which may arise in the ordinary course of his business as such member;
shall not be deemed to be a speculative transaction.'
In the case of Keshavlal Premchand v. Commissioner of Income-tax the Division Bench of the Bombay High Court expressed the view that even though the main portion of sub-section 24 of the Indian Income-tax Act, 1922, provides only for cases where an assessee sustaining a loss under one of the heads of income, profits or gains under any of the other heads mentioned in section 6, claims to have it set off against his income, profits or gains under any of the other heads mentioned in section 6, the first proviso to that sub-section is not confined in its application to such cases but applies also to cases where a loss in speculative transactions in the nature of a business is sought to be set off against profits from other kinds of business transactions and the profit and the loss fall under the same head, namely, 'business'. The Bench expressed the view that it is clear, on the language of the proviso itself, and on the scheme of the Act, that the Legislature in enacting the so called proviso was enacting a substantive provision dealing with the mode of computing the profits and gains chargeable under the head 'profits and gains of business, profession or vocation', and what the Legislature has provided is that when you compute these profits and gains the loss sustained in a speculative transaction must not be taken into account except to the extent of the amount of profits and gains, if any, in any other business consisting of a speculative transaction.
It was also observed that though as a general rule a proviso to a section can apply only to cases which but for the proviso would have fallen within the section, and in construing statutes the operation of a proviso must ordinarily be confined to cases which might otherwise fall within the section, the Legislature may enact a substantive provision in the garb or guise of a proviso, and if the court is satisfied that the language used in the so called proviso is clearly wider in its scope, and is itself a substantive provision, effect must be given to the language used by the Legislature.
This matter came up also before a Full Bench of this court in Commissioner of Income-tax v. Ram Sarup. The Full Bench held that on a true interpretation of section 10 and sub-section (1) of section 24 of the Income-tax Act and the first proviso thereto, an assessee is not entitled to claim a set-off of the loss suffered by him in speculative business against the profits of the assessee in a business consisting of non-speculative transactions. In the case before the Full Bench the assessee wanted all his losses suffered in speculations to be set off against profits from business and his share of income from firms in which he was a partner. The case of Keshavlal Premchand referred to above was followed by the Full Bench. Reliance was also placed upon Commissioner of Income-tax v. Ramgopal Kaniyalal and Manohar Lal Munshi Lal v. Commissioner of Income-tax. In our view the matter is concluded by the decision of the Full Bench of our court in Commissioner of Income-tax Ram Sarup referred to above. Before us it was also urged that a proviso should not be interpreted so as to give it a greater effect than the strict construction of the proviso rendered it necessary. This is no doubt a well-settled principle : vide Corporation of the City of Toronto v. Attorney-General for Canada and In re Tabrisky. But this is not a rule which admits of no exception. Ordinarily the principal purpose of the proviso is to restrict the general language of a statute. It has been often noticed that this principle is very often deviated by the Legislature and has not been applied in its strict correctness, which results in ambiguity. When such is the case the courts instead of applying the technical rule prefer to ascertain the legislative intention. Sometimes the result is that the statute is enlarged by the proviso. It even occasionally happens that the proviso assumes the status of an independent enactment and does not confine itself merely to limiting or qualifying what has preceded it. In such cases the weight of authorities is that the proviso should be construed in harmony with the rest of the statute. In discovering the legislative intent not statutes in pari materia but the statute itself containing the proviso should be considered in its entirely : vide Statutory Construction by Crawford, paragraph 297, page 604 (1940 issue). This is how the proviso has been construed by the Full Bench of this court and also by the Division Bench of the Bombay High Court in the cases referred to above.
Mr. C. L. Aggarwal, learned counsel for the assessee, has drawn our attention to the last proviso in sub-section (1) of section 24. He contended that his case is covered by provisos (a) and (c). According to this proviso, contracts in respect of raw material and merchandise entered into by any person in the course of his manufacturing or merchanting business to guard against loss through future price fluctuations in respect of his contracts of actual delivery of goods manufactured by him or merchandise sold by him shall not be deemed to be speculative transactions. Similarly contracts entered into by a member of a forward market or stock exchange in the course of any transaction in the nature of jobbing or arbitrage to guard against the loss which may arise in the ordinary course of its business as member is not treated as a speculative transaction. Mr. Aggarwal contends that the Tribunal should have examined these provision and should have treated the assessees case to be covered by the above provisions. The difficulty in accepting the contention which we find in our way is that in order to claim the benefit of the provision of this proviso certain facts have to be alleged and also substantiated. Both under provisos (a) and (c) of this proviso the state of affairs conceived therein has to be asserted and material placed on the record to prove the same. Mr. Aggarwal has drawn our attention to the statement of facts to which reference has already been made. To our mind what is contained in the statement falls short of satisfying the requirements of provisos (a) and (c) set out above. The function of this court under section 66 (1) is very much restricted. The High Court cannot go behind the finding of the Tribunal not it can raise any question suo motu. The scope of jurisdiction of this court under section 66 (1) is circumscribed. Before a question can be raised it has to be shown that it was duly referred to the High Court under the provisions of section 66 (1). The High Court may even be required to call upon the Appellate Tribunal to refer the matter under section 66 (2) to it. The Supreme Court has expressed the view that section 66 of the Income-tax Act which confers jurisdiction upon the High Court only permits reference of a question of law arising out of the order of the Tribunal. It does not confer jurisdiction on the High Court to decide a different question of law not arising out of such order : see Kusumben D. Mahadevia v. Commissioner of Income-tax. In a later decision, Commissioner of Income-tax v. Scindia Steam Navigation Co. Ltd., the Supreme Court laid down the four principles for the guidance of High Courts when examining the question under section 66 (2) of the Act. Following the view adopted by this court and taking into consideration the principles laid down for the guidance of the High Courts we feel that the matter which Mr. Aggarwal is seeking before us is beyond our purview. Reference in this connection may also be made to two decisions of this court in Banka Mal Lajja Ram and Company v. Commissioner of Income-tax and Sobha Singh v. Commissioner of Income-tax. We are in the circumstances unable to accede to the wishes of the learned counsel for the assessee to go into the new matter arising under provisos (a) and (c) to Explanation 2 to sub-section (1) of section 24. In view of what has been stated above this question must be answered in the negative. Our answer to the question referred to us, therefore, is that on a true interpretation of the proviso to sub-section (1) of section 24 of the Indian Income-tax Act, the losses of Rs. 33,082 and Rs. 26,632 suffered by the assessee in speculative transactions of the assessment year 1953-54 and 1955-56 respectively cannot be set off against profits from non-speculative business. The Commissioner of Income-tax, Punjab, is entitled to his costs which we assess at Rs. 250 in all, in both the references.
P. D. SHARMA J. - I agree.
Question answered in the negative.