TMI Blog2001 (3) TMI 273X X X X Extracts X X X X X X X X Extracts X X X X ..... bank loans outstanding. 3. The Commissioner (Appeals) has failed to give any consideration for the case laws referred to by the Assessing Officer in his elaborate discussion in the asst. order but simply relied on the case laws cited by the assessee, the facts of which are distinguishable. 4. The Commissioner (Appeals) ought to have followed the judicial decisions reported in 185 ITR 535, 126 ITR 779, 126 ITR 476 and 65 ITR 643 and upheld the order of the Assessing Officer." 2. Briefly stated, the facts of the case are that the assesses is a cine actress by profession. Besides she is deriving income from property and also income from manufacturing and trading activity done under the name of AVK Chemical Industries. It is stated that the manufacturing activity in respect of AVK Chemical Industries was stopped since the year 1989 and that during the year 1984 the assessee had made some efforts to revive trading activity in respect of that business. In the course of the assessment proceedings the assessee had taken a plea before the Assessing Officer that the loss claimed under the head "businesses allowable either for the reason that there is only a lull and inactivity of its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot agreeable with the above argument yet the loss claimed had to be allowed since the assessee had been maintaining the common account for all her activities, namely profession and business. For this proposition the counsel relied on the Madras High Court decision in the case of CIT v. S.S.M. Ahmed Hussain [1987] 164 ITR 525. It was further submitted that according to the decision of the Madras High Court case, though the assessee's activity consisted of two entirely different lines of business, namely film business and national bonds (buying and selling) yet the High Court held that so long as there was unity of control for both the businesses like inter connection, inter lacing and inter dependence the loss claimed in one head of business can be allowed even though that business had been discontinued. It was further argued that the said Madras High Court decision was again based on the clear principles laid down by the Supreme Court in the case of Standard Refinery Distillery Ltd v. CIT [1971] 79 ITR 9. Therefore it was contended before the first appellate authority, for the reasons discussed above that the assessee's claim for allowance of loss under AVK Chemical Industries wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led which shows that there has been no trading or manufacturing. The Profit and loss account filed shows only profit on sale of land amounting to Rs. 1,59,400 and debit of Rs. 5,80,727 being the bank interest and debit of expense of Rs. 24,000. 4.5 For the assessment year 1992-93 the assessee has filed only the profit and loss account where only the bank interest of Rs. 2,88,257 had been debited and this is the only expenditure which resulted in loss of Rs. 2,88,257 in the case of M/s. AVK Chemical Industries. 4.6 From the above it is very clear that there has been a complete cessation of the business activity of the assessee, i.e., namely M/s. AVK Chemical Industries right from the assessment year 1989-90 upto 1992-93. Even beyond it is clear from the profit and loss account filed by the assessee for the assessment year 1993-94 where only sale of old items of Rs. 2,750 has been reported. 4.7 The case of Vikram Cotton Mills Ltd. quoted by the assessee is not relevant to the present case. This is the case where the point considered by the Apex Court was where the rental income on letting of mills on lease was business income or not and whether earlier years' losses could be se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to be added together and the aggregate sum so arrived at would represent the profits or gains in the business of the assessee. But in the case of the assessee the assessee has unreasonably claimed the set off of so called loss of business against the income from profession of the cine artist. 7.1 The case of Assam Biscuit Mfg. Co. Ltd. v. CIT [1990] 185 ITR 535 (Gauhati) squarely applies to the facts of the assessee's case. In the above case the assessee-company was incorporated with the object of manufacturing biscuits and other bakery products. From the inception the company proved to be a non starter. In June, 1973 the Board of Directors in a report to the shareholders stated that the company had suffered heavy losses. The company did not manufacture biscuits after 1-3-1973. The plant, machinery and other equipments of the company were sold and the sale proceeds were utilised to liquidate the liabilities of the company. The factory premises alongwith the furniture and fixtures were leased out. The assessee claimed that its business was not discontinued and pointed out from the records that goods worth Rs. 762 had been purchased after June, 1973. It also claimed that the rent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. In this connection the decision of the Allahabad High Court in the case of Ramchand Sons Sugar Mills (P.) Ltd. V. CIT [1972] 86 ITR 645 and the decision of the Supreme Court in the case of Standard Refinery Distillery Ltd v. CIT [1971] 79 ITR 9 also were relied on. Hence no allowance can be made with regard to the interest payable by the assessee to the bank in respect of M/s. AVK Chemical Industries and consequently any loss resulting therefrom could not be set off against the professional income of the artist assessee. 8. On the other hand, the learned counsel for the assessee reiterated the submissions made before the first appellate authority as his submissions. Apart from that he contended, to say in brief that: Section 72 deals with carry forward of business loss and that is totally different from section 36, which deals with allowability of current year's expenses and the loss. There was lull in the activity of the business of M/s. AVK Chemical Industries. The income earned from profession was used for repayment of bank loan. Adverting to page 3 of the annexure to the assessment order for the assessment year 1991-92, it may be seen that the assessee had shifted to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n both the businesses in jewellery and in the exhibition of films till 31-7-1965 and that only thereafter was the activity of exhibition of films discontinued and that the liability to pay interest had arisen in respect of the business carried on by the assessee till 31-7-1965. The Tribunal accordingly upheld the decision of the Appellate Assistant Commissioner to permit the deduction under section 36(1)(iii). The High Court came to the conclusion that since the closing of the cinema business had not affected in the least the assessee's business in jewellery, there was no interconnection, interlacing or interdependence between the jeweller business and the cinema business. The High Court disallowed the deduction. On appeal the Supreme Court held: "The Tribunal was right in concluding that such interest had to be treated as a deduction under section 36(1)(iii) of the Act. The loans had been obtained for the purposes of the assessee's business. The fact that the particular part of the business for which the loans had been obtained had been transferred or closed down did not alter the fact that the loans had, when obtained, been for the purpose of the assessee's business. Apart from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idered under the head 'profits and gains of business or profession' as per section 28 of the Income-tax Act. In case there is loss in one of the sources under the same head of income, the manner as to how it is to be dealt with is found in section 70 of the Income-tax Act, 1961. According to section 70, as already extracted above unless otherwise stated in the Act, if the net result in respect of any source falling under the same head of income is a loss, the assessee is entitled to have the amount of such loss set off against his income from any other source under the same head. The assessee is having two sources under the same head, namely profession as cine artist and proprietrix of M/s. AVK Chemical Industries. Applying the provisions of section 28 and section 70 of the Income-tax Act it is to be concluded that the loss from the business activity of M/s. AVK Chemical Industries is to be adjusted against the profit from profession as cine actress while computing 'Profits and gains of business or profession' for any assessment year. When section 70 of the Income-tax Act uses the phrase 'shall be entitled' it is to be construed that the current loss from the business is necessaril ..... X X X X Extracts X X X X X X X X Extracts X X X X
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