TMI Blog1994 (2) TMI 101X X X X Extracts X X X X X X X X Extracts X X X X ..... 30-9-1984, the assessee adjusted the loss arising in the Dankuni Unit's accounts against the profit of Taratola Unit. The loss was allowed in the assessment made on 30-3-1988. The CIT later took proceedings under section 263 of the Income-tax Act, 1961. According to him, the assessment order was erroneous and prejudicial to the interests of revenue inasmuch as the loss of the Dankuni Unit as set off against the profits of the Taratola Unit. He took the view that the Dankuni Unit was not a new business of the assessee and the assessee cannot be permitted to opt to close the accounts of the new Unit on any date other than the date of closing adopted in respect of the accounts of Taratola Unit. In other words, the assessee did not have the option of having a separate accounting year in respect of the Dankuni Unit and the provisions of section 3(1)(d) of the Act were not applicable. Sub-section (3) of section 3 was not also applicable to the assessee's case since the Dankuni Unit was not a new business of the assessee, and was the same as the Taratola Unit, and, therefore the assessee cannot be permitted to have a separate accounting year in respect of the Dankuni Unit. In coming to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d determine whether the assessee started any new business in setting up a new Unit at Dankuni. He should further examine if the previous year of the new Unit if it is, taken as a new business, be taken on ending with the said financial year. Finally, he may consider any other points which may come to his notice in this regard. It is needless to say that the Assessing Officer should allow proper opportunity before finalising the assessment order. " 4. The assessee questions the order of the CIT before us. Mr. Bajoria appearing for the assessee strongly criticised the conclusion of the CIT. He stated that the new Unit at Dankuni was a separate source of income as far as the assessee is concerned, notwithstanding the fact that the nature of the business in that Unit was the same as that in the Taratola Unit. According to him, the assessee was free to adopt a different accounting year in respect of a different or separate source of income even under the same head under section 3(3) of the Act. He pointed out that the CIT has confused the expression "source of income" with the expression "business" which has resulted in the erroneous conclusion that the assessee cannot have a separat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that his decision to set off the loss in the Dankuni Unit against the profits of the Taratola Unit has been criticised on the merits. It is therefore not possible to accept the preliminary objection of the D.R. for which he brought in aid the judgment of the Delhi High Court cited supra. 7. From a reading of the order of the CIT, it is perfectly clear that, as contended by Mr. Bajoria, the CIT has mixed up the expression "business" and "source of income". The decision of the Allahabad High Court in Seth Shiv Prasad's case cited by Mr. Bajoria describes what is meant by a "source of income". His Lordship Justice R. S. Pathak (as His Lordship then was) first referred to the authoritative pronouncement in Rhodesia Metals Ltd. v. Commissioner of Taxes [1941] 9 ITR (Suppl.) 45 where the Privy Council observed that "source means not a legal concept but something which a practical man would regard as a real source of income; as a hard matter of fact". His Lordship then referred to the judgment of the Madras High Court in CIT v. V.E.K.R. Savumiamurthy [1946] 14 ITR 185. In that decision, it was held that in the case of income from business which is a separate head of income under the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that it is possible for income in each head to be derived from various sources. Section 3(3) of the Act clarifies that an assessee is not precluded from having different previous years in respect of separate sources of income within the same head. It was further held that the sub-section clarifies that it is open to an assessee to opt for different previous years for different sources of income under the same head. The provision was held to be an enabling provision meant for the benefit of the assessee. The same principle was adopted by the Andhra Pradesh High Court in K. Ramachandra Rao's case, wherein it was held that income from salary was a separate source of income for a Judge in respect of which he can have a different previous year. 9. These decisions establish beyond doubt that section 3(3) does not speak of separate heads of income but speaks of separate sources of income. The distinction between the "heads of income" and the "sources of income" has always to be kept in view. The Dankuni Unit of the assessee, the profits from which are also assessable under the head "business", nevertheless, constitutes a separate source of income for the assessee in respect of which the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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