TMI Blog1978 (5) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... s 1953, 1954 and 1955. The appellant used to carry on business in, (i) general insurance, (ii) brokerage and commission, and (iii) import and sale of woollen fabrics, leather beltings, hardware, toilet goods, chemicals, cotton fabrics, etc. The business of import and sale was closed by the appellant towards the end of the calendar year 1952, corresponding to the assessment year 1953-54. In that year, the appellant suffered an accumulated business loss of Rs. 56,488. From the assessment year 1954-55, that is to say, from the commencement of the calendar year 1953, the appellant started exporting cotton textiles instead of importing woollen fabrics which, as stated earlier, it had ceased to do towards the end of the calendar year 1952. The appellant claimed that the loss of Rs. 56,488 incurred by it on the import and sale of articles mentioned above should be set off against the profits made by it during the assessment years 1954-55, 1955-56 and 1956-57. The Income-tax Officer and the Appellate Assistant Commissioner rejected the appellant's claim on the ground that the business of importing and selling goods was distinct and separate from the business of exporting goods; and sin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same capital and the same management looked after the businesses in the different ventures would not, according to the Commissioner, make the import and export businesses carried on in different years the same business. The Commissioner's attention was drawn to a judgment of this court in Produce Exchange Corporation Ltd. v. Commissioner of Income-tax [1970] 77 ITR 739 (SC), but he felt that the decision was distinguishable since the appellant therein was carrying on business in diverse commodities in the same year and the import business was stopped in subsequent years. Consequently, the Commissioner rejected the revision applications pertaining to the three assessment years. These appeals by special leave are directed against the orders passed by the Commissioner. Section 6 of the Indian Income-tax Act, 1922, which corresponds to section 14 of the Act of 1961, classified all incomes for the purposes of charge of income-tax and computation of total income under six heads, the fourth being "Profits and gains of business, profession or vocation". Section 10(1) 650 of the Act of 1922 taxed the profits of business, profession or vocation carried on by the assessee. By section 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, the consideration whether in the year of profit the assessee was carrying on the same business which he was carrying on in the year in which the unabsorbed loss occurred is not irrelevant. Indeed, it is not even irrelevant for the purposes of section 72 of the Income-tax Act, 1961, which corresponds to section 24(2) of the 1922 Act. After the amendment of section 24(2) in 1955 and under section 72 of the Act of 1961, the right to carry forward an unabsorbed loss depends upon whether the assessee still carries on the business in which the loss was incurred. That involves consideration of the question whether the business carried on by the assessee is the same which he was carrying on when he suffered a loss. Under section 24(2) of the Act of 1922, an unabsorbed loss could be carried forward to be set off against the profits of a subsequent year or years, only if such profits accrued to the assessee from the same business and not otherwise. It is elementary that, in law, the two words "same" and "similar" connote different concepts and, therefore, the carrying on of a similar business will not meet the requirements of the section. The business has to be the same as before. But, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany as ship owners was different from its business as underwriters because the two businesses were not interlaced or dovetailed into each other. In Commissioner of Income-tax v. Prithvi Insurance Co. Ltd. [1967] 63 ITR 632 (SC), the respondent-company carried on the business of life insurance as well as general insurance. Both life insurance and general insurance businesses were attended to by its branch managers and agents without any distinction. There was one common administrative organisation and the expenses incurred both for administration and for heads of expenditure such as salary of the staff, postage, staff welfare fund and general charges, were common. The question was whether the unabsorbed losses of the respondent-company for the assessment year 1950-51 and earlier years in respect of life insurance business could be set off against its profits of the general insurance business for the assessment years 1951-52 to 1954-55 under section 24(2) of the Indian Income-tax Act, 1922. Speaking for the court, Shah J. adopted the test evolved by Rowlatt J. as a "fairly adequate test" for determining whether the two businesses constituted the same business and held: "That inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sive test was unity of control and not the nature of the two lines of business and, therefore, the Tribunal was right in its decision that the share business and other businesses carried on by the company constituted the same business within the meaning of section 24(2) as it stood before its amendment in 1955. This conclusion was reached by the court by applying the test in Scales [1927] 13 TC 83 (QB). There is only one other judgment to which we would like to refer and that is Standard Refinery and Distillery Ltd. v. Commissioner of Income-tax [1971] 79 ITR 589 (SC). The appellant, which owned a distillery and had acquired a sugar refinery, obtained on lease a sugar and gur refining company with effect from June 1, 1945. The appellant purchased a certain number of shares of that company in 1946 and sold them in 1947 at a loss. A part of this loss was unabsorbed and the question which arose for consideration was whether the appellant could carry forward that loss and set it off against the income from sugar manufacturing and distillery for the subsequent year. Hegde J., speaking for the court, observed that the concepts of inter-connection and inter-lacing, inter-dependence and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which has to prevail is" whether, "notwithstanding the fact that the assessee may close one activity, it does not interfere in the carrying on of the other activity". The fact that one business cannot conveniently be carried on after the closure of the other may furnish a strong indication that the two businesses constitute the same business. But the decision of this court in Prithvi Insurance Co. [1967] 63 ITR 632 (SC) shows that no decisive inference can be drawn from the fact that after the closure of one business, another may or may not conveniently be carried on. The Commissioner also overlooked that in the report dated June 6, 1962, which the Income-tax Officer made in the revision applications filed by the appellant, it was expressly stated that it was true that "there was a common control and common management of the same board of directors" of the business of import and export. Thus, the unity of control and the other circumstances adverted to above show that there was dovetailing or inter-lacing between the business of import and the business of export carried on by the assessee and that they constitute the same business. For these reasons, we set aside the orders passe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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