36.  Speculation losses.-

(1)   Where an assessee sustains a loss in any assessment year in respect of any speculation business carried on by him, it shall not be set-off, except against profits or gains, if any, of another speculation business carried on by him and assessable for that assessment year.

(2)   Where, for any assessment year, any loss computed in respect of a speculation business has not been wholly set-off under sub-section (1), so much of the loss as is not so set-off, or the whole of the loss where the assessee has no income from any other speculation business, shall be carried forward to the following assessment year and set-off against the profits and gains, if any, of speculation business carried on by him and assessable for that assessment year; and if the loss cannot be wholly set-off in this manner, the amount of the loss not so set-off shall be carried forward to the following assessment year and so on, but no loss shall be carried forward for more than six assessment years immediately succeeding the assessment year for which the loss was first computed.

Explanation. -The expression "speculation business", as used in this section and section 22, means business in which a contract for the purchase and sale of any commodity (including stocks and shares) is periodically or ultimately settled otherwise than by the actual delivery or transfer of the commodity or scripts, but does not include business in which-

(a)    a contract in respect of raw materials or merchandise is entered into by a person in the course of his manufacturing or mercantile business to guard against loss through future price fluctuations for the purpose of fulfilling his other contracts for the actual delivery of the goods to be manufactured or the merchandise to be sold by him;

(b)    a contract in respect of stocks and shares is entered into by a dealer or investor therein to guard against loss in his holdings of stocks and shares through price fluctuations; and

(c)    a contract is entered into by a member of a forward market or a stock exchange in the course of any transaction in the nature of jobbing or arbitrage to guard against loss which may arise in the ordinary course of his business as such member.