TMI Blog1959 (6) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... g 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 linseed. The assessee claimed that against the profit made buy it in the cloth business in the year of assessment 1949-50 should be set off the losses suffered in the speculation business which were brought forward from the preceding year. It was claimed by the assessee that the cloth business and the business in speculation in gold, silver, cotton, shares, Haitian and linseed constituted the same business. The Income-tax authorities negatived the contention raised by the assessee. The assessment proceedings were brought before the Income-tax Appellate Tribunal, and Mr. Aggarwal the Judicial Member and Mr. Malhotra the Accountant Member, constituting the Tribunal, disagreed in their conclusion on that question raised before them. Mr. Aggarwal was of the view that the speculation business and the cloth business constituted the same busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate 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 one of legal inference to be drawn from the facts proved, it may be regarded as a question of law. The test for ascertaining whether two lines of business conducted by the same assessee constitute the same business or distinct businesses was happily expressed by Mr. Justice Rowlatt in Scales v. George Thompson Co., Ltd. [1927] 13 Tax Cas. 83. The learned Judge observed: ...the real question is, was there any inter-connection, any interlacing, any inter-dependence, any unity at all embracing those two business. In considering a similar question in Scales' case* Mr. Justice Rowlatt observed that he could not conceive of two businesses that could be more easily separated than the two which were conducted by the assessee in that case. He pointed out that both the businesses had something to do with ships and that was all that could be said ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 could not be said that there was identity between the two lines of business carried on by the assessee. He the reasons given for drawing the inference from the six factors set out by Mr. Aggarwal and came to the conclusion that between the two lines of business conducted by the assessee there was no inter-connection, interlacing, inter-dependence or dovetailing or unity embracing the two lines. With this view, as we have already observed, the President appeared to agree. Prima facie it may appear that when the two members of the Tribunal agreed that there was no interconnection, interlacing, inter-dependence or dovetailing of the two lines of business nor any unity in conduct thereof, the finding recorded by the Tribunal is binding upon this court: but we do not propose to rest our judgment merely on this view. It is true that one set of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 assistance of the staff employed in the cloth business may have been obtained : but in the view of the President of the Tribunal this assistance must have been trivial. In our view, even if some assistance was obtained from the staff maintained for the cloth business, that is not a circumstance which establishes an inter-connection or inter-dependence between the two lines of business. The source of the capital which weak employed for the two lines of business was undoubtedly the same : and the receipts in respect of the business in cloth and the speculation business went into that source and from that source monies were withdrawn indiscriminately, and even the overhead charges and the other expenses in the two lines of business were regarded by the Members of the Tribunal as common. It is true that these circumstances may, in a proper case, together w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 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 cases cited any particular circumstance or set of circumstances was held decisive of the question whether two or more lines of business conducted by an assessee constituted the same business within the meaning of section 24(2) of the Income-tax Act. We may make a brief reference to the cases cited at the Bar which have, it is evident, been decided on a collective appreciation of the facts and circumstances of the cases, and not on the application of any general principle. The first case, which was referred to by Mr. Kolah, was Chidambaram Chettiar v. Commissioner of Income-tax [1945] 13 I.T.R. 177. In that case, a money-lending business carried on by the assessee at Karaikudi in British Indian and another similar business carried on by him in the Federated Malay State at Penang were regarded as the same business because the business ope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 1941-42 under section 24(2). Delivering the supplementary judgement of the court, Mr. Justice Chagla, as he then was, observed that speculation by itself was to a nexus that connected the silver business with the cotton business conducted by the assessee and that what would make those businesses into one business was not the factor of peculation or the fact that the assessee did not take delivery of those commodities but did forward business, but some other inter-connection or a nexus which had to be found independently of the speculative character of those business. It appears that the learned Judge, though with some reluctance, agreed on the facts with the view taken by Sir Leonard Stone, Chief Justice, that the business in speculation in cotton and speculation in silver conducted by the assessee was the same business. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the profits of the business and also perhaps to impress the commercial public in Rangoon and command credit facilities and that the speculations were merely ancillary to the ready-goods business and they converged to the same point, namely, the earning of profits as a result of the rice and grains business. It was evident from the finding of the court that the speculation business was ancillary to the principal business in rice and grains and, therefore, the two lines were regarded as the same business. This case also does not seem to lay down any principle of general application. The two Members of the Tribunal have, in the present case, negatived the existence of inter-connection, interlacing or inter-dependence between the two businesses conducted by the assessee. They have also negatived the existenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 proved facts or if the court is satisfied that the Tribunal had misdirected itself in law. The facts leading up to this reference and the somewhat chequered history of the case have been succinctly set out by my brother and it is not necessary for me to reiterate the same: nor is it necessary for me to set out in this judgment the six factors which found favour with the Judicial Member of the Tribunal and led him to the conclusion that in this case the business conducted by the assessee was the same business within the meaning of section 24(2) of the Income-tax Act. I shall very briefly refer to those six factors, which Mr. Kolah, learned counsel for the assessee, has very strongly relied upon and indeed urged as decisive of the case. The argument has been that these six factors were not prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eing 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 losses in respect of that business with his own monies and it was with his own monies that he carried on the cloth business. Therefore, the source of the capital employed in the two businesses cannot have any particular importance in the present case. Then there are the last two elements relied on by Mr. Kolah. They relate to receipt of monies and overhead expenses. The factor of receipt of money has little bearing on the question before us; and the payment of overhead charges also has hardly any bearing on the point when we are dealing with a speculation business of the nature carried on by the assessee. It has been argued by the learned counsel for the assessee that these six are all tests which have been applied by courts in numerous cases in determining the question of the nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing. 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 distinct and there is no basic oneness in the nature of the two business, then it cannot be said that they are the same business for the purpose of section 24(2) of the Income-tax Act. Our attention was drawn by the learned counsel for the assessee to a number of decisions which have already been examined by my brother. I do not see anything in those cases which lends support to the argument pressed for our acceptance by Mr. Kolah. I shall make only one observation on those cases. From an examination of those cases it does emerge that the nature of the two businesses must in some way be shown to be connected: and in the case before us it is extremely difficult to see how the nature of the cloth business was connected with the nature of the business in speculation carried on by the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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