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. ( 4 ) ON further appeal before the Tribunal, the Departmental Representative, referring to Sections 71, 72 and 73 of the Act, urged that the direction given by the Commissioner of Income-tax (Appeals) was not in accordance with the said provisions. The Assessing Officer was directed accordingly to take action. ( 4 ) ON further appeal before the Tribunal, the Departmental Representative, referring to Sections 71, 72 and 73 of the Act, urged that the direction given by the Commissioner of Income-tax (Appeals) was not in accordance with the said provisions. The Assessing Officer allowed the set off against the provisions of Sections 71, 72 and, therefore, the order of the Assessing Officer on this issue should be maintained. ( 5 ) COUNSEL for the assessee referred to Explanation 2 to Section 28, Section 43 (5) and Section 73 of the Act and urged that speculative business of an assessee is a separate and distinct business and the loss earned under this head should be separately treated. The speculative loss is only available for set off against the speculative profit of the year or against that of the subsequent years. Section 73 is very clear and, therefore, the Commissioner of Income-tax (Appeals) was justified in allowing the claim of the assessee. ( 6 ) THE Tribunal after considering the submission of the parties held that the speculative profit of the assessee was not available for set off against the other income of the assessee for the year. Under the said circumstances, the Tribunal held that the finding of the Commissioner of Income-tax (Appeals) was in accordance with the provisions of Section 73 and accordingly the same was maintained. ( 7 ) AT the hearing before us, the contention raised before the Tribunal have been reiterated. Our attention has been drawn by learned counsel for the Revenue to a decision of the Supreme Court in the case of CIT v. Harprasad and Co, P. Ltd. In that case, during the accounting period ending April 30, 1954, relevant to the assessment year 1955-56, the assessee sold certain shares at a loss of Rs. 28,662 which it claimed as a revenue loss. Both the Income-tax Officer and the Appellate Assistant Commissioner rejected the claim on the ground that the loss was a capital loss. On appeal, the Tribunal accepted the contention of the respondent raised for the first time that the capital loss of Rs. 28,662 which it claimed as a revenue loss. Both the Income-tax Officer and the Appellate Assistant Commissioner rejected the claim on the ground that the loss was a capital loss. On appeal, the Tribunal accepted the contention of the respondent raised for the first time that the capital loss of Rs. 28,662 should be carried forward and set off against capital gains, if any, in the future, even though tax was not chargeable under Section 12b of the Indian Income-tax Act, 1922, on capital gains derived during April 1, 1948, to March 31, 1956. On a reference, the High Court held that if capital loss was incurred in a year in which capital gains did not attract tax under Section 12b such loss would still be loss under the head "capital gains" and it could be carried forward and set off against capital gains in a subsequent year. On appeal to the Supreme Court by the Commissioner the decision of the High Court was reversed and it was held that the capital loss could not be determined and the respondent was not entitled to the carry forward of the loss of Rs. 28,662. ( 8 ) THIS decision has no application to the facts of this case. In that case during the relevant period, capital gains, whether on the positive or the negative side, could not he computed and charged under Section 12b or any other provisions of the 1922 Act. There, the Supreme Court observed at page 126 of 99 ITR as follows :". . . . during the period Section 12b did not make income under the head 'capital gains' chargeable, an assessee was neither required to show income under that head in his return, nor entitled to file a return showing 'capital losses' merely for the purpose of getting the same computed and carried forward. Sub-section (2a) of Section 22 would not give him such a right because the operation of that sub-section is, in terms, confined to, (i) a loss which is sustained under the head 'profits and gains of business, profession or vocation' and would ordinarily have been carrjed forward under Sub-section (2) of Section 24, and (ii) to 'income' which falls within the definition of 'total income'. Both these conditions necessary for the application of the sub-section are lacking in the present case. Both these conditions necessary for the application of the sub-section are lacking in the present case. Nor do we find any substance in the contention that under Sub-section (2) read with Sub-section (1) of Section 24, the assessee had an independent right to carry forward his capital loss, even if it could not be set off, owing to the non-taxability of capital gains, against future profits, if any, in the immediate subsequent years. Sub-section (2) of Section 24 expressly refers to loss 'in any business, profession or vocation'. It does not cover a 'capital loss', or the minus income under the head 'capital gains' which at the relevant time were not chargeable and did not enter into computation of the 'total income' of the assessee under the Act. " ( 9 ) MR. Bajoria, learned counsel appearing for the assessee, on the other hand, relied on a judgment of the Bombay High Court in Navnitlal Ambalal v. CIT [1976] 105 ITR 735. In that case, the question arose whether carried forward speculation loss could be set off only against the profits determined under Section 10 of the old Act or should be first set off against the speculation profits of the current year. In deciding that question the Bombay High Court relied on a circular of the Board dated September 12, 1960. In that case in the assessment for the assessment year 1958-59, the assessee claimed that the carried forward losses should be first set off against the speculation profits of the current year ; but the Tribunal held that the profit or loss of the current year should be first arrived at under Section 10 of the Indian Income-tax Act, 1922, before setting off the carried forward loss under Section 24 (2 ). ( 10 ) THERE, the Bombay High Court relied on the aforesaid circular dated September 12, 1960, and observed as follows (at page 738) :"this circular relates to adjustment of speculation profits in the current year against the carried forward speculation loss. The relevant part of the circular is as under : 'point (v) : Speculation loss, if any, carried forward from the earlier years or the speculation loss, if any, in a year should first be adjusted against speculation profits of the particular year before allowing any other loss to be adjusted against those profits. Board's decision : The suggestion is acceptable. Board's decision : The suggestion is acceptable. For the purpose of set-off under Section 10 and Section 24 (1), the speculation loss of any year should first be set off against the speculation profits of that year and the remaining amount of speculation profits, if any, should then be utilised for setting off of any loss of that year from other sources. For the purposes of Section 24 (2), the Income-tax Officer may allow the assessee - (i) either to first set off the speculation losses carried forward from an earlier year against the speculation profits of the current year and then to set off the current year's losses from other sources against the remaining part, if any, of the current year's speculation profits ; (ii) or to first set off the current year's losses from non-speculation business and other sources against the current year's speculation profits and then to set off the carried forward speculation losses of the earlier year against the remaining part, if any, of the current year's speculation profits, whichever is advantageous to the assessee. [for points (i) to (iv) considered by the C. B. R. see 43 (5)]. ' it is thus clear from this circular that if speculation losses for the earlier years are carried forward and if in the year of account a speculation profit is earned by the assessee then the circular provides that such speculation profits for the accounting year should be adjusted against the carried forward speculation loss of the previous year before allowing any other loss to be adjusted against those profits. In view of this circular the position is beyond any doubt so far as the present question is concerned. " ( 11 ) SECTION 73 of the Act provides that any loss, computed in respect of speculation business carried on by an assessee, will not be set off except against profits and gains, if any, of another speculation business. Further, where any loss, computed in respect of speculation business for an assessment year is not wholly set off in the above manner in the said year, the excess shall be allowed to be carried forward to the following assessment year and set off against the speculation profits, if any, in that year, and so on. Further, where any loss, computed in respect of speculation business for an assessment year is not wholly set off in the above manner in the said year, the excess shall be allowed to be carried forward to the following assessment year and set off against the speculation profits, if any, in that year, and so on. On a plain reading of Sections 70, 71 and 73, it will be evident that the losses in speculation business cannot be set off under Section 70 against any income under the head "business or profession" nor under Section 71 against income under any other head, but it can be set off only against profits, if any, of another speculation business. Section 73 effects complete segregation of speculation losses, which stand distinct and separate and can be mixed for set off purposes, only with speculation profits. It is clear from the said circular of the Board which still holds the field that if speculation losses for the earlier years are carried forward and if in the year of account a speculation profit is earned by the assessee, then, such speculation profits for the accounting year should be adjusted against carried forward speculation losses of the earlier year, before allowing any other losses to be adjusted against those profits. In our view, the circular gives effect to the intention of the Legislature as speculation business being distinct and separate, the profit and loss arising therefrom should also be dealt with separately. If there be any speculation profit in the year of account after set off of speculation losses of earlier years, such profit may then be available for adjustment of loss, if any, arising from any other business. For the reasons aforesaid, the question in this reference is answered in the affirmative and in favour of the assessee. No order as to costs.