1971 (1) TMI 7 - SC - Income Tax

Sale transaction as well as the business of manufacturing sugar constituted the same business within the meaning of s. 24(2) of Indian Income-tax Act 1922. Therefore the assessee can set off the unabsorbed loss in the sale of shares against its other business income - Assessee s appeal allowed

Summary

Issues:
- Whether the business of dealing in shares and the business of manufacturing sugar constitute the same business under section 24(2) of the Income-tax Act, 1922?

Analysis:
The case involved an appeal by an assessee, a public limited company, concerning the assessment for the year 1949-50. The assessee incurred a loss from selling shares, which it sought to set off against profits from its sugar business. The Income-tax Officer, Appellate Assistant Commissioner, and Appellate Tribunal all denied the set-off. The High Court, in response to a question of law, ruled against the assessee, prompting an appeal to the Supreme Court.

The Supreme Court initially found the statement of the case incomplete and directed the Tribunal to provide a supplementary statement. The Court emphasized the need to consider evidence of inter-connection between the share transactions and the sugar business. The Tribunal's second supplementary statement revealed common management, organization, administration, fund usage, and place of business between the share dealings and other business activities of the company.

The revenue contended that there was no inter-connection, inter-lacing, inter-dependence, or unity between the share transactions and other business activities. However, the Court referred to precedents emphasizing the importance of common management, organization, administration, fund, and place of business in determining the unity of business activities. In a similar case, the Court had previously ruled in favor of unity of control over the nature of business lines.

Ultimately, the Supreme Court allowed the appeal, discharging the High Court's answer and ruling in favor of the assessee. The Court held that unity of control was the decisive test for considering whether the share dealings and other business activities constituted the same business under the Income-tax Act. The revenue was ordered to pay the costs of the assessee in both the Supreme Court and the High Court.