Ramanlal Prabhudas Shah vs Commissioner of Income Tax, Bombay North

Chagla, C.J.—Ramanlal Shah and Manilal Lalji carried on business in the assessment year 1953-54 in the name Rajnikant & Co. The firm made profits of Rs. 37,253 in speculative business. The firm is a registered firm and under the partnership agreement each partner was entitled to 8 annas share in those speculative profits, with the result that a sum of Rs. 18,000 of the speculative profits was allocated to the share of Ramanlal Shah, on of the partners. Now, Ramanlal Shah carried on speculative business on his own and in that business he suffered loss to the extent of Rs. 5,894. He sought to set off this loss against his share of speculative profits in the sum of Rs. 18,000. The Income Tax Officer rejected the claim, the Appellate Assistant commissioner admitted it, and the Tribunal has taken the same view as the Income Tax Officer.

Now, the view taken by the Tribunal is that the income from speculative profits which came to the share of Ramanlal was income which fell u/s 12 of the Indian Income Tax Act. That view is directly contrary to the view expressed by us in Shantikumar''s case. In that case we have considered the scheme of the Act and after careful consideration of all that was urged by counsel before us we held that when in the case of a registered firm the profits of the firm are allocated to the various partners, that income of the partner is income from business and falls u/s 10 and not u/s 12. If that be true position, then it is clear that Ramanlal would be entitled to set off the loss Rs. 5,894 against the profit of Rs. 18,000 because under the first proviso to section 24 (1) it is stated :

"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."

Therefore, Ramanlal had suffered loss in speculative transactions and he is seeking to set it off against profits and gains which have been earned in another business consisting of speculative transactions.

We will therefore answer the first question : "under section 10"; the second question in the affirmative; the third question does not arise.

The Commissioner to pay the costs.

Question answered accordingly.