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1959 (6) TMI 27

he assessee is a Hindu undivided family. It carries on business as a wholesale dealer in cloth in two names: (i) Manilal Dayabhai, Vithalwadi, Bombay, and (ii) Dayabhai Sobharam, Champa Galli, Bombay. The business with the up-country merchants is carried on in the name of Manilal Dayabhai, and the local business is carried on in the name of Dayabhai Sobharam. The assessee also carries on business in speculation in gold, silver cotton, etc. Two separate sets of books of account are maintained by the assessee in respect of the business carried on in the two names. We are in this reference concerned with the business which is carried on by the assessee in the name of Dayabhai Sobharam. For the assessment year 1949-50, the assessee returned a total income of ₹ 1,38,946 from the business done in the name of Dayabhai Sobharam. In arriving at that figure the assessee deducted from the gross income an amount of ₹ 1,04,042 as loss suffered in the speculation business in shares, cotton, gold, silver and other commodities. In the assessment years 1947-48, and 1948-49, the assessee had suffered losses in speculation in gold, silver, cotton and shares as also in seeds, hessian and l .....

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siness as the cloth business carried on by it and that burden was not discharged by the assessee, and observed that if it necessary for him to express an opinion he would agree with the view taken by Mr. Malhotra. In this reference Mr. Kolah for the assessee has strenuously contended that all the usual indicia which are regarded as determinative of "same business" within the meaning of section 24(2) of the Income-tax Act are found present in this case by all the three members of the Tribunal, and that Mr. Malhotra and the President were in error in coming to the conclusion that on those indicia the cloth business and the business in speculation carried on by the assessee did not constitute one and the same business. Normally where the assessee carries on two different lines of business, it is a question of fact whether they constitute two separate and distinct businesses or whether they are in truth branches or departments of one and the same business. It is true that the conclusion of the Tribunal, which is founded on no evidence or which is unreasonable or perverse, may not be regarded as binding even if it is apparently on a question of fact. Again, if the question is .....

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hat the speculation business as well as the dealings in cloth were carried on from the assessee's shop in Champa Galli in the name of Shah Dayabhai Sobharam; (iii) That the business was carried on with the help of the same staff; (iv) That the capital employed for both the businesses was the same; (v) That the receipts in respect of one business were utilised for purposes of the other business indiscriminately and vice versa; and (vi) That the terms of overheads and other expenses were common. In the view of Mr. Aggarwal, all these factors led to the inevitable inference that the two lines of business conducted by the assessee constituted the same business. In his view, it could not be said that merely because the nature of the speculation business was different from that of dealing in cloth that the two lines of business constituted separate businesses. Mr. Malhotra was of the view that the principal business of the assessee was the cloth business and that the speculation business was carried on by the assessee by debiting the funds to the cloth business, and merely because there were withdrawals made from the cloth business for the purpose of the business in speculation it co .....

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not be wholly set off under sub-section (1), so much of the loss as is not so set off...shall be carried forward to the following year and set off against the profits and gains, if any, of the assessee from the same business, profession or vocation for that year..." It is evident that under this section the losses incurred by the assessee in his business in any year may, if unabsorbed, be carried forward to the following year and set off against the profits and gains of the assessee from the "same business" for that year, but not of any distinct business. It is true that the circumstance that accounts were maintained in the same set of books in respect of two different lines of business may have to be considered in the context of the other circumstances, but, in our judgment, that is not decisive. The speculation business and the cloth business were, it is true, primarily conducted from the assessee's shop at Champa Galli in the name of Shah Dayabhai Sobharam, but, here again, that circumstance does not establish any inter-connection between the two businesses conducted from the same shop. It also appears that in carrying on the speculation business some assistan .....

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simultaneously conducting was forward dealings in gold, silver, linseed, hessian, shares and seeds. The nature of the two lines of business was entirely independent of each other, and there was no unity between the two lines of business conducted by the assessee. The nature of the two lines of business from the same source, conducting of the business from the same shop and attendance to the business by the same owner with the aid of the same staff do not by themselves establish the necessary unity which would constitute the same business. Mr. Kolah for the assessee cited a large number of decisions in support of his contention that the circumstances which are found in this case were present in the cases cited by him and that in those cases it was held that two lines of business conducted by the assesses in those cases were the same business. It would be fruitless, however, to enter upon a detailed analysis and comparison of the facts on which the various cases cited before us at the Bar were decided. The decisions in those cases evidently proceeded upon inferences drawn from the facts found proved by the Income-tax Tribunals. It may be sufficient to observe that in none of the case .....

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ommon, that the registered firm was carrying on business as merchants and that, therefore, he was free to conclude that the registered form by engaging in speculation in different commodities such as hardware, cement, rice, wheat, year, salt, grain and cession was not entering into different business. Here again, the conclusion of the court is found upon the existence of inter-weaving in many respects between the different lines of business conducted by a firm of merchants. In Govindram Bros. Ltd. v. Commissioner of Income-tax [1946] 14 I.T.R. 764 the assessee-company was carrying on sine its incorporation speculation in various commodities in several markets, and the business was conducted in the same premises, by the same staff, and with the aid of the same accounts, and when the assessee-company sought to set off the loss under section 24(2) of the Income-tax Act, it was held by this court that speculation in cotton was the same business as speculation in silver and that the assessee-company was entitled to set off the loss in speculation in silver carried forward from the assessment year 1940-41 against the profits from speculation in cotton considered in the assessment year 19 .....

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tain goods at Rangoon through his agents. He also entered into forward contracts in respect of those goods through his agents at Rangoon. The agents sent to the assessee from time to time statements of account in respect of these transactions in a separate folio in the same account books at Tuticorin. The financing of all the transactions was from Tuticorin and the control of all the transactions was under a single management. The court on these facts held that the transactions in forward contracts carried on by the assessee in the Rangoon grain market were a part of the general business of the assessee as a dealer in rice and grain and that the assessee was, therefore, entitled to set off the loss against the profits under section 24(2) of the Income-tax Act. We may point out that Mr. Justice Viswanatha Sastri, who delivered the supplementary judgment of the court, on a review of the evidence came to the conclusion that the business was carried on by the same person, through the same agency, with the same funds, both with reference to the dealings in futures and forwards contracts as well as ready goods, that the speculations in futures were entered into with a view to increase th .....

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a question which is largely one of fact. It has been said that we have to look at the nexus in determining whether two sets of business operations conducted by a person can or cannot be said to be the same business. Emphasis has sometimes been laid on the place where the business is carried on, or the mode or method of carrying on the business, or the source from which the capital employed in the business has flown and other similar facts which indubitably have relevance in their own setting, and at times are of considerable importance. But, as I have already stated, it is impossible to expect any general test which can be applied in all circumstances and to all facts. Therefore, what we have to do in this case is to find out whether looking at the facts already found by the Tribunal it can broadly be said that the business of the assessee was or was not the same business as found by the Tribunal. I may repeat that the question is largely one of fact, though, of course, a reference to court is permissible, and indeed allowed, when it appears to the court that the finding of the Tribunal was without any evidence to support it or that no proper legal inference had been drawn from pr .....

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and ankadas are received, or even the place where the merchant keeps the record of his speculation transactions is not of any particular importance. In a loose sense, it may be said to be the place where he carries on his business, but that certainly is not a factor to which any importance can be attached. Then there is the factor of the same staff being employed in respect of the speculation business and the business in cloth carried on by the assessee. It is not possible to attach any particular importance to this factor also in view of the nature of the two businesses. Very little work, if any, had to be done by the staff employed for the conduct business which, it is said, also helped in the speculation business. Then there is the factor of the capital employed for both the businesses being the same. There can be cases in which the employment of capital in the businesses may have some bearing on the determination of the question. But in the present case I do not see how the assessee can rely on the factor that it was the same capital which was employed in both the businesses. In the speculative business, which consisted of forward transactions, he received profits and paid off .....

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e short judgment of the learned Judge in that case and the facts of that case go to show that it was the nature of the two business activities which weighed with the court in deciding the question. In the same judgment, the learned Judge also observed: "I cannot conceive two businesses that could be more easily separated than those two. They both have something to do with ships; that is all that can be said about them. One does not depend upon the other; they are not interlaced; they do not dovetail into each other, except that the people who are in them know about ships; but the actual conduct of the business shows no dovetailing of the one into the other at all. They might stop the underwriting; it does not affect the ships. They might stop the ships and it does not affect the underwriting." Having regard to the facts and circumstances of this case, I would prefer to lay stress on the nature of the two businesses. In determining the question whether the two businesses can be called the same business or not, consideration must be directed to the concordant activities, if any, and to the basic singleness, if any, of the two businesses. If the activities are diverse and di .....

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