Ajit K.Sengupta, J. - (1.) In this reference under Section 256(1) of the Income-tax Act, 1961, the following questions of law have been referred to this court for the assessment year 1985-86 : "1. Whether, on the facts and in the circumstances of the case and also on a proper interpretation of Sections 71 and 72 of the Income-tax Act, 1961, the Tribunal was correct in law in holding that the speculation profit of the current year would not be available for set off under Section 70 of the Income-tax Act, 1961, against the current business loss of the assessee before adjustment under Sub-section (2) of Section 73 of the Income-tax Act, 1961 Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in upholding the Commissioner of Income-tax (Appeals)'s order that speculation profit of the current year should first be adjusted against the speculation loss of earlier years and not against the current year's business loss ?
(2.) Shortly stated, the facts are as under : The assessee is an investment company, During the year, the assessee earned speculation profit of Rs. 4,60,475. The Assessing Officer adjusted the speculation profit of the assessee against the business loss of the current year and the balance was set off against speculation loss carried forward from the assessment years 1981-82 and 1982-83, and consequently nil income was taken for the assessment year 1985-86.
(3.) On appeal, the Commissioner of Income-tax (Appeals) held that as per Section 73(2) of the Act, the brought forward speculation business losses should be set off only against the speculation business profits for the following assessment years. Accordingly, the assessed speculation business losses for the assessment years 1980-81 to 1984-85 would require to be set off only against the assessed speculation business income of Rs. 4,60,475 for the assessment year 1985-86. The unabsorbed speculation business losses would be carried forward under Section 73(2) for being set off against the speculation business profits for the following years according to law. The Assessing Officer was directed accordingly to take action.;