TMI Blog1966 (10) TMI 49X X X X Extracts X X X X X X X X Extracts X X X X ..... ndent, a public limited company, carried on in the relevant years of account business of insurance-life and general. In each of the calendar years 1944 to 1948, relating to the assessment years 1945-46 to 1950-51, the company suffered loss in the life insurance section, and made profit in the general insurance section. Till the assessment year 1950-51, the loss suffered in the life insurance section was allowed by the revenue authorities to be carried forward and set off under section 24(2) of the Indian Income-tax Act, 1922, against profits from the general insurance section in the subsequent year. In proceedings for assessment for the assessment year 1951-52, the Income-tax Officer held that the life insurance business and the general ins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eneral insurance contracts, the life contract is made once and for all. The general insurance contracts are, in law, fresh contracts entered into at the time of each renewal. Thirdly, life business is controlled by principles essentially variant from those which control the general insurance business. Fourthly, the life premia do not represent the life profits nor can the total amount of claims arising in one year be set off as a deduction. Fifthly, the law under which life business is carried on is quite different from the laws governing general business; and, lastly, assessable profits of life business shall be computed separately from those of the general business, the consequence of which would be that the carry forward of loss of life ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment is to be made, so as to exclude from it any surplus or deficit included therein which was made in any earlier inter-valuation period and any expenditure other than expenditure which may under the provisions of section 10 of this Act be allowed for in computing the profits and gains of a business, whichever is the greater . . . " Rules 3 and 4 lay down the methods of computing the surplus for the purpose of rule 2. Rule 5 is a definition clause. Rule 6 deals with the computation of profits and gains of any business of insurance other than life insurance, and provides that the profits and gains of any business of insurance other than life insurance shall be taken to be the balance of the profits disclosed by the annual accounts, c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to admissibility of loss from speculative business), that loss has to be set off against the income, profits or gains under any other head. Sub-section (1) does not however deal with carry-forward to the following year of loss suffered by the assessee as a result of computing the total income from all the heads. That is dealt with under sub-section (2). Section 24(2), as it stood at the material time, provided : " Where any assessee sustains a loss of profits or gains in any year, being a previous year not earlier than the previous year for the assessment for the year ending on the 31st day of March, 1940, in any business, profession or vocation, and the loss cannot be wholly set off under sub-section (1), so much of the loss as is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in issue. If the life insurance business and the general insurance business were not " the same business " within the meaning of section 24(2), loss in the life insurance business which could not be set off against income from other businesses of the company and sources of income, could not be carried forward and set off in the year following against the income from the general insurance business. Counsel for the Commissioner contended that life insurance business and general insurance business were separate businesses and he relied in support of that contention primarily upon the method of computation of taxable income of the life insurance business and of the general insurance business. Both in respect of the life insurance business a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charges, were common. We are unable to agree with counsel for the Commissioner that the test, whether one of the businesses can be closed without affecting the conduct of the other business, is a decisive test in determining whether the two constitute the same business within the meaning of section 24(2). If one business cannot conveniently be carried on after the closure of the other, there would be a strong indication that the two businesses constitute " the same business ", but no decisive inference may be drawn from the fact that after the closure of one business another may conveniently be carried on. In the present case the Tribunal's judgment proceeds not upon any special circumstances governing the distinctive organization, ma ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
