1969 (2) TMI 1 - SC - Income Tax

Carry Forward And Set Off - cloth business of the assessee and its business in the general section constituted the same business within the meaning of section 24(2) - conclusion of the Tribunal that the transactions in cloth were part and parcel of a single business carried on by the appellant and did not constitute a distinct business for the purpose of section 24(2) is correct - Assessee s appeal allowed

Issues Involved:
1. Whether the cloth business and the general business of the assessee constituted the same business within the meaning of section 24(2) of the Indian Income-tax Act, 1922.

Issue-wise Detailed Analysis:

1. Same Business under Section 24(2) of the Indian Income-tax Act, 1922:
The primary issue was whether the cloth business and the general business of the assessee constituted the same business under section 24(2) of the Indian Income-tax Act, 1922. The relevant assessment years were 1955-56, 1956-57, and 1957-58, with corresponding accounting years being 1954, 1955, and 1956. Losses from the years 1953-54 and 1954-55 amounted to Rs. 2,13,898 and Rs. 46,050 respectively, and the Income-tax Officer refused to allow the carry forward and set-off of these losses against the business profits of the relevant years. The officer argued that the losses arose from the cloth business, which was distinct from the other business carried on by the assessee and that since the cloth business was not carried on during the relevant year of account, the losses could not be carried forward and set off against profits of the other business.

The Appellate Assistant Commissioner supported this view, emphasizing the distinct nature of the cloth business, which had separate overdraft accounts, staff, and operational procedures compared to the general business. The Tribunal, however, held that the cloth business was part of a single business carried on by the assessee, noting inter-relations in financial arrangements, staff, and management.

The High Court disagreed with the Tribunal, stating that the cloth business was separate from the general business despite some inter-connection of expenses or control. The High Court emphasized the nature of the business and the way it was conducted, concluding that the Tribunal's inference was not warranted by the facts on record.

Legal Provisions and Interpretation:
Section 24(2) of the Act, before its amendment by the Finance Act of 1955, allowed for the carry forward and set-off of losses from the same business, profession, or vocation. The principal contentions from the appellant-assessee were that the Tribunal's findings on questions of fact were final and that the losses from the cloth business were liable to be carried forward and set off against the profits during the relevant assessment years. The respondent argued that the High Court could prefer the findings of the Appellate Assistant Commissioner over those of the Tribunal due to misreading or irrelevant consideration of evidence by the Tribunal.

Supreme Court's Analysis:
The Supreme Court referenced the principle from Setabganj Sugar Mills Ltd. v. Commissioner of Income-tax, stating that whether different ventures form the same business is a mixed question of law and fact. The Court noted that the Tribunal's findings were based on evidence showing inter-connection, inter-lacing, and unity between the cloth business and the general business. The Tribunal's findings included:
1. The appellant's dealings in cloth started in 1946.
2. The appellant had been doing business in several commodities.
3. The cloth business did not constitute a distinct and separate business.
4. There was sufficient evidence of dovetailing of the cloth section into the general section.

The Supreme Court held that the High Court was not justified in preferring the findings of the Appellate Assistant Commissioner over those of the Tribunal without a proper question challenging the Tribunal's findings. The Court emphasized that the Tribunal's findings must be accepted as final and that the High Court could only examine whether the cloth business could be regarded as the same business within the meaning of section 24(2).

Conclusion:
The Supreme Court concluded that the Tribunal's conclusion was correct and that the cloth business was part and parcel of a single business carried on by the assessee. The question referred should have been answered in the affirmative and in favor of the assessee. The appeals were allowed with costs, and the answer returned by the High Court was discharged.

Final Judgment:
The appeals were allowed, and the High Court's decision was overturned, affirming that the cloth business and the general business of the assessee constituted the same business within the meaning of section 24(2) of the Indian Income-tax Act, 1922.

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