COMMISSIONER OF INCOME TAXGUJARAT III, AHMEDABAD & ANOTHER vs KURJI JINABHAI KOTECHA

The Supreme Court held that losses from illegal hedging transactions cannot be set off against profits from lawful speculative businesses in subsequent years, as per the Forward Contracts (Regulation) Act, 1952. The Court clarified that allowing such a carry forward would permit benefits from illegal activities, which is against legal principles. The judgment of the Gujarat High Court in Commissioner of Income-tax v. S.C. Kothari was partly reversed, reinforcing that illegal business losses cannot benefit the taxpayer in future lawful transactions.