HON’BLE SUPREME COURT · SOURCE-REVIEWED NOTE
Commissioner of Income-tax, Gujarat v. Kantilal Nathuchand Sami
Civil Appeal No. 676 of 1965
[1967] 1 SCR 813 ·
Indian Income-tax Act, 1922: sections 10(2), 23(1), 23(3), 23(5)(a), 24(1) and 24(2)
Sources & disclosures includedDownload original judgment / order
3-judge bench; unanimous judgment delivered by V. Bhargava, J. · J. C. Shah, J. · V. Ramaswami, J. · V. Bhargava, J.
Assessment years: 1958-59, 1959-60, 1960-61
01 · Facts of the case
The registered firm carried on property, ready-kappa and speculation activities. It incurred speculation losses in assessment years 1958-59 and 1959-60 and a speculation profit of Rs.6,19,784 in 1960-61. The Income-tax Officer did not set the earlier losses against the firm's other income but apportioned them among the partners. When the firm later claimed the losses against its 1960-61 speculation profit, the officer refused. The appellate authority, Tribunal and Gujarat High Court ultimately accepted the firm's carry-forward position (SCR pp.814-816; PDF pp.2-4).
Source: Primary judgment: facts
02 · Discussion by the Hon’ble Court
The first proviso to section 24(1) removed speculation losses from set-off against other business profits and from the firm's total-income computation. Reading 'any loss' in the second proviso to include that segregated loss would nullify the first proviso; only the residual loss forming part of total income was apportioned to partners. Section 23(5)(a) did not independently require apportionment of a loss excluded from total income. Proviso (c) to section 24(2), which restricted how a registered firm could carry forward loss, also presupposed that some unapportioned loss could remain with the firm. The Court declined to follow the contrary Bombay view in Commissioner of Income-tax v. Chimanlal J. Dalal & Co. (SCR pp.816-820; PDF pp.4-8).
Source: Primary judgment: discussion
03 · Judicial decision
The Court upheld the Gujarat High Court and dismissed the Revenue's appeal with costs (SCR p.820; PDF p.8).
Source: Primary judgment: decision
04 · Outcome / in whose favour
In favour of the registered firm. Its historical speculation losses could be carried forward and set off against the firm's later speculation profit under the 1922 Act scheme (SCR pp.819-820; PDF pp.7-8).
Source: Primary judgment: outcome
05 · AKHB REVIEW POINT
AKHB analysis: trace whether a loss ever entered the entity's total-income computation before asking who carries it forward. Here the speculation loss was segregated before partner apportionment. The later 1961 Act registered-firm provisions were materially different, so this holding requires statute-specific treatment rather than current-law generalisation (based on SCR pp.816-820; PDF pp.4-8).
Source: Primary judgment: reviewPoint
Source & verification
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Statutory scope
The holding concerns a registered firm under the repealed 1922 Act. The Supreme Court later distinguished this scheme when applying sections 73 and 75 of the 1961 Act. This note does not state current speculation-loss or partnership rules, and no comprehensive later-treatment clearance was undertaken.
Later treatment
Source checked 2026-10-11. Later judicial treatment and current statutory applicability have not been comprehensively checked; no current-law or citator clearance is represented.
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