GOSWAMI, J. - (1.) THIS appeal by certificate is from the judgment of the Gujarat High Court in an Income-tax Reference under Section 66 (1) of the Indian Income-tax Act, 1922 (briefly the Act).
(2.) THE two questions which were earlier referred by the Tribunal to the High Court at the instance of the Commissioner of Income-tax, Gujarat III, are as follows:- "(1) Whether, on the facts and in the circumstances of the case, the assessee was entitiled to set off hedging loss of Rs. 31,745.00 against other profits of the previous year? (2) Whether, on the facts and in the circumstances of the case, the assessee was entitled to carry forward the speculation loss of Rs. 41,603.00 to the next year?" The following facts appear from the statement of case and the order of the Tribunal: The assessment year in question is 1957-58 and the corresponding previous year is the Samvat year 2012. The assessee is carrying on business by running an oil mill, and also doing business in sales and purchase of groundnuts, groundnut seeds and oil; speculation business in groundnuts, groundnut oil and groundnut seeds; and speculation business in cotton, erranda etc. His total income for the year in question was determined by the Income-tax Officer as Rs. 1,71,632.00. This was after allowing set off of loss brought forward from the year 1955-56 amounting to Rs. 2,11,431.00. In arriving at the figure of the total income, the Income-tax Officer disallowed loss amounting to Rs. 73,348.00 in forward contracts in groundnut oil, groundnuts and groundnut seeds. He disallowed this loss on the ground that it arose out of illegal contracts on account of the same being banned under Section 15 (4) of the Forward Contracts (Regulation) Act, 1952. It will appear that the break-up of losses in the business of illegal forward contracts it as follows:- JUDGEMENT_719_2_1977Html1.htm The above third item of loss is arrived at by the Income-tax Officer after adjusting the profit of the forward business in groundnut seeds at Rajkot.
(3.) ON appeal by the assessee the Appellate Assistant Commissioner affirmed the order of the Income-tax Officer. The Appellate Assistant Commissioner, however, bifurcated the loss into two categories as follows:- JUDGEMENT_719_2_1977Html2.htm The Appellate Assistant Commissioner held that the assessee was not entitled to the set off of the loss against the assessee's other business under Section 24 (1) of the Act and also that such loss could not be carried forward to the following year under S. 24 (2) of the Act.;