This is a reference under section 66(1) of the Income-tax Act. The following three questions of law have been referred for our decision by the Income-tax Appellate Tribunal (Delhi Bench 'A') by its order dated the 8th June, 1962 :
'(1) Whether the losses arising from speculative transactions have been properly disallowed and carried forward ?
(2) Whether, on the facts, the Tribunal has properly held that the speculative transactions were separate and distinct from commission agency business ?
(3) Whether the Tribunal was justified on the facts to find that the commission payment of Rs. 17,590 which was paid on the assessees speculative transactions, formed a direct charge and, therefore, rightly loaded against speculative transactions ?'
The assessee is a registered firm. It is a member of the Forward Exchange and carried on speculation business in grains, silver, gold, cotton, etc. The assessee received large amount of commission in regard to forward transactions entered into on behalf of its constituents. The commission amounted to Rs. 1,02,621. The assessee also carried on speculation business on his own account. In this business, the assessee incurred a loss of Rs. 53,437. The assessee sought to set off this loss against the commission income. This contention was rejected by the Income-tax Officer, the Appellate Assistant Commissioner on appeal and the Tribunal in second appeal. The Tribunal found the following facts :
'(1) The assessee is a commission agent and a dealer in the forward market. The commission is earned on forward transactions which is earned as a member of the forward exchange.
(2) There was a total loss of Rs. 53,437 in speculative transactions. This loss includes a commission payment of Rs. 9,925 to self; the true loss, therefore, is Rs. 43,512.
(3) The assessee paid a commission of Rs. 17,590 to outsiders in respect of his own forward transactions.
(4) The net loss of Rs. 43,512 in speculative transactions has been rightly disallowed; the section applicable being the proviso to section 24(1).
(5) The Appellate Assistant Commissioner was right in ignoring, in effect, the commission of Rs. 9,925 paid to self.
(6) The assessees claim that the commission of Rs. 17,590 paid by him to other commission agents in respect of forward transactions should be separated, taken out and allowed against commission receipts, cannot be upheld because they have been properly charged and debited against speculative transactions.'
Mr. Karkhanis who appears for the assessee did not dispute that the second question is not correctly framed. We have reframed the second question as follows :
'Whether there is evidence for the conclusion that the speculation transactions were separate and distinct from the commission agency business ?'
So far as the first question is concerned, its decision will depend on the answer to second question. If the speculation transactions are separate and distinct from the commission agency business, we will have to answer the first question against the assessee in view of the Full Bench decision of this court in Commissioner of Income-tax v. Ram Sarup, and the Division Bench decision of this court in Punjab Trading Co. Ltd. v. Commissioner of Income-tax. The view of this court is also shared by the Calcutta and the Patna High Courts. See in this connection the decision of the Calcutta High Court in Hoosen Kasam Dada (India) Ltd. v. Commissioner of Income-tax and of the Patna High Court in Sahu Jain Ltd. v. Commissioner of Income-tax.
The Full Bench of This court 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 speculation business against the profits of the assessee in a business other than a business consisting of speculative transactions.'
With regard to the second question, as reformed, the short question that arises for determination is whether there is evidence on record for the finding of the Tribunal that the assessees business regarding speculative transactions is separate and distinct from his commission agency business. After going through the record, we are clearly of the view that there is material on which the Tribunal has based its finding that the two businesses, of speculative transactions and commission agency, are separate and distinct businesses. The contention of the learned counsel for the assessee that commission agency business is an integral part of the speculative business, therefore, cannot be upheld. In this view of the matter, the first and the second questions are answered against the assessee.
While dealing with the third question, the Appellate tribunal observed as follows :
'This take us to the third claim of the assessee that the commission paid on his own transaction (to other commission agents) should be segregated and allowed. As we have pointed out above, the true profits and loss of a transaction can only be worked out after allowing the commission paid in that transaction, therefore, the speculative profits and losses can only be worked out after debiting the commission paid. The assessees accounting is not only in conformity with the normal accountancy but is also correct inasmuch as the trading losses (whether ready for or future) has been properly accounted for. The assessees claim for the commission payments of Rs. 17,590 cannot, therefore, be upheld.'
After hearing the learned counsel for the assessee, we do not find any reason to depart from the aforesaid conclusion of the Tribunal. The assessees counsel was unable to point out any error in that decision.
For the reasons recorded above, we answer all the three questions against the assessee. The Commissioner of Income-tax will be entitled to the costs of this reference, which are assessed at Rs. 200.