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Determining whether two activities of an assessee constitute one business or two businesses. Analysis: The judgment delivered by the High Court of Allahabad pertained to the assessment years 1950-51, 1951-52, and 1952-53, involving the question of whether the managing agency of a company and dealing in its shares constitute one business or separate businesses. The case involved B. R. Sons (P.) Ltd., Kanpur, as the assessee, which acquired the managing agency of Meyer Mills Ltd. The Income-tax Officer disallowed the claimed loss on revaluation of shares as capital loss for previous years. The subsequent assessment years saw the assessee seeking set off for unabsorbed losses, which was largely disallowed on the premise that managing agency and share dealing were distinct businesses. The Appellate Tribunal, however, viewed the two activities as constituting one business, leading to a reference to the High Court by the Commissioner of Income-tax, U. P. The court considered the interconnection and interdependence of the ventures to determine if they formed a single business. Citing precedents like Setabganj Sugar Mills, Ltd. v. Commissioner of Income-tax and Standard Refinery & Distillery Ltd. v. Commissioner of Income-tax, the court emphasized the need for interlacing and interdependence to establish a unified business entity. It also referred to cases like Manilal Dahyabhai v. Commissioner of Income-tax and Ramnarain Sons (Pvt.) Ltd. v. Commissioner of Income-tax to illustrate factors influencing the classification of activities as one business. The court noted the arguments presented by both sides, highlighting the twin objectives behind the purchase of shares and the acquisition of managing agency. While the department contended that the activities could be carried out separately, the assessee pointed out various factors favoring the unity of the two operations. The court acknowledged the Tribunal's finding that the company effectively combined the two activities, leading to the conclusion that they constituted one business. In light of the circumstances and probabilities favoring the assessee, the court answered the reference question affirmatively, ruling in favor of the assessee. The Commissioner of Income-tax, U. P., was directed to pay the assessee costs of the reference. The judgment underscored the importance of examining the interconnectedness and unity of operations to determine the existence of a single business entity, thereby resolving the issue at hand comprehensively.
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