1965 (2) TMI 132 - HC - Income Tax

Summary

Issues:
1. Admissibility of loss in Tata deferred shares for deduction under section 10 of the Income-tax Act.
2. Determining whether dealings in shares, cotton waste, and money-lending constitute the "same business" under section 24(2) of the Income-tax Act.

Analysis:
1. The judgment concerns references from the Income-tax Appellate Tribunal regarding the admissibility of a loss of Rs. 21,881 in Tata deferred shares for deduction under section 10 of the Income-tax Act. The Tribunal also questioned if dealings in shares, cotton waste, and money-lending constitute the "same business" under section 24(2) of the Act.
2. The assessee, a private limited company, derived income from various sources, including shares, brokerage, money-lending, dividends, cloth, and cotton waste businesses. The references related to assessment years 1950-51, 1952-53, and 1953-54, with the Tribunal examining the losses and profits from different income heads during these years.
3. The Tribunal held that the loss in speculative business could not be set off against profits from other income sources, citing relevant case law. It also determined that losses from share dealings in previous years could not be carried forward and set off against income from cloth and waste cotton business, as these were not considered the "same business."
4. A Division Bench decision established that losses from speculative dealings could be set off against profits from other businesses under section 10(1) of the Act. Consequently, the first question regarding the admissibility of the loss in Tata deferred shares was answered affirmatively in favor of the assessee.
5. The second question hinged on whether the Tribunal's finding that dealings in shares, cotton waste, and money-lending did not constitute the "same business" was supported by evidence and legal inference. The Tribunal's decision was based on principles laid down by Rowlatt J. and supported by relevant case law.
6. The Tribunal's conclusion that the businesses of cloth and cotton waste were not the same as share dealing and jobbering was upheld, emphasizing the need to consider all facts and circumstances in determining the "same business" concept under section 24(2) of the Act.
7. The Tribunal's legal inference was deemed justified, and the second question was answered in the affirmative but against the assessee. Both parties were directed to bear their own costs, with the Commissioner of Income-tax entitled to costs in specific references.

In conclusion, the judgment addresses the admissibility of losses in specific businesses for deduction and the criteria for determining whether different business activities constitute the "same business" for income tax purposes under relevant sections of the Income-tax Act.