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2014 (5) TMI 153 - HC - Income TaxEntitlement for claim of set off of past losses - same business - Criteria for determination of claim Nature of the business OR common management Held that - The decisive test is the unit of control, common management and common control of business and not the nature of the two line of the business - The main consideration which has to prevail is notwithstanding the fact that the assessee may close one activity and to carry on the other activity, if there is unity of control, common control and common management who carried out the business earlier and in a subsequent year it amounts to carry on the same business in the year under consideration - the set off of the loss has been claimed against income from the business which accrued from the business activity - The two nature of business is wholly irrelevant - The Tribunal has categorically recorded the finding that there was common management, unity of control and common control of business continued there was no error in the order of the Tribunal Decided against Revenue.
Issues Involved:
1. Whether the Tribunal is justified in holding that the business of the assessee remained the same based on the criterion of unit of control and common management. 2. Whether the Tribunal is justified in holding that the assessee is entitled to claim set off of past losses against the income of the current assessment year 1988-89 in view of the proviso to clause (i) of sub-section (1) of Section 72 of the Income Tax Act. Issue-wise Detailed Analysis: 1. Business Continuity and Unit of Control: The Tribunal's decision was based on the principle that the decisive test for determining the continuity of business is the unit of control and common management, not the nature of the business. The Tribunal referenced the Supreme Court's rulings in Produce Exchange Corporation Ltd. v. Commissioner of Income Tax and B.R. Ltd. v. V.P. Gupta, Commissioner of Income Tax, which emphasized that inter-connection, inter-lacing, inter-dependence, and unity are indicative of the same business. The Tribunal found that the assessee's business had common management and unity of control, despite the cessation of the steel mill operations and the commencement of new business activities. The Tribunal concluded that the business remained the same due to the continued common management and unity of control. 2. Set Off of Past Losses Against Current Income: The Tribunal allowed the set off of past losses against the current year's income, relying on the Supreme Court's interpretation of Section 72 of the Income Tax Act. The Tribunal noted that the proviso to clause (i) of sub-section (1) of Section 72 requires that the business for which the loss was originally computed continues to be carried on by the assessee in the relevant assessment year. The Tribunal found that the assessee's business activities, though varied, were under common management and control, fulfilling the requirement of continuity. The Tribunal rejected the assessing authority's disallowance of the set off, which was based on the argument that the nature of the business had changed. The Tribunal emphasized that the nature of the business is irrelevant if there is common management and unity of control. Judgment: The High Court affirmed the Tribunal's decision, agreeing that the decisive test is the unity of control and common management, not the nature of the business. The Court referenced the Supreme Court's rulings and other High Court decisions that supported this interpretation. The Court dismissed the appellant's reliance on the Bombay High Court's decision in Khandelwal Industries Pvt. Ltd. v. Commissioner of Income Tax and the Punjab & Haryana High Court's decision in Tara Devi Behl v. Commissioner of Income Tax, noting that these cases were either distinguishable on facts or lacked comprehensive reasoning. The High Court concluded that the Tribunal's findings were based on a correct interpretation of the law and facts, and there was no error in its order. The appeal was dismissed, and the questions of law were answered in favor of the assessee and against the revenue.
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