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TMI Blog2014 (5) TMI 153X X X X Extracts X X X X X X X X Extracts X X X X ..... come Tax Appeal No. - 141 of 2000 - - - Dated:- 23-4-2014 - Hon'ble Rajes Kumar And Hon'ble Shashi Kant,JJ. For the Appellant : A. N. Mahajan,C. S. C. For the Respondent : Amit Shukla,S. K. Garg ORDER (By Hon'ble Rajes Kumar,J) Heard Sri RK Upadhayay, learned Senior Standing Counsel and Sri Ashish Bansal appearing on behalf of the respondent. This is an appeal under section 260 (A) of the Income Tax Act (herein after referred to as the Act ) relating to the assessment year 1988-89 raising the following substantial questions of law: (1) whether, on the facts and in circumstances of the case, the Tribunal is justified in holding that the business of the assessee remained the same, because the criterion is not the nature of business but the unit of control and common management (2) whether in view of the proviso to clause (i) of sub section (1) of Section 72 of the Act, the Tribunal is justified in holding that the assessee is entitled to claim of set off of past losses against the income of the current assessment year 1988-89 Brief facts of the case are that for the assessment year in dispute, the respondent assessee (herein after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erence if other conditions, the common management, Unity of Control or common control of the business continues. The Tribunal recorded finding that the business of the assessee remained the same as there was unity of control and common management. Sri RK Upadhayay, learned counsel for the appellant submitted that carried forward loss is allowable under section 72 of the Act. The proviso of sub-section 72 says that business or profession for which the loss was originally computed continued to be carried on by him in the previous year relevant for that assessment year. In the present case the loss was suffered by the manufacturing unit, which was closed in the assessment year 1985-86 and no business activity has been carried on. In the year under consideration source of the income of the assessee was the commission from M/s International Electrical Industries, Lucknow and the business of Rake handling of M/s U.P. State Cement Corporation which was different to the business carried on in the earlier year in which the loss has been suffered and therefore such carried forward loss cannot be allowed. The reliance has been place on the decision of the Bombay High Court in the case of K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) Where for any assessment year, the net result of the computation under the head Profits and gains of business or profession is a loss to the assessee, not being a loss sustained in a speculation business, and such loss cannot be or is not wholly set off against income under any head of income in accordance with the provisions of section 71, so much of the loss as has not been so set off or, where he has no income under any other head, the whole loss shall, subject to the other provisions of this Chapter, be carried forward to the following assessment year, and (i) it shall be set off against the profits and gains, if any, of any business or profession carried on by him and assessable for that assessment year ; (ii) if the loss cannot be wholly so set off, the amount of loss not so set off shall be carried forward to the following assessment year and so on : Provided that where the whole or any part of such loss is sustained in any such business as is referred to in section 33B which is discontinued in the circumstances specified in that section, and, thereafter, at any time before the expiry of the period of three years referred to in that section, such business is r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shares in the Public Limited Company. The assessing authority has disallowed the set off of loan against the profit of transaction in other company. The matter went to the Apex Court. The said disallowance of the loss has been affirmed by the High Court. Reliance has been placed on the decision of the Appex Court in the case of CIT v Prithvi Insurance Co., Ltd [(1967) 63 ITR 632 (SC)], relevant portions of the judgement runs as under: This Court in Commissioner of Income-tax Madras v. Prithvi Insurance Company Ltd [(1967) 63 (SC) : TC 45 R. 349 set of the test for determining whether two lines of business constitute same business within the meaning of s. 24(2) at the relevant time. It was observed : A fairly adequate test for determining whether the two constitute the same business is furnished by what Rowlatt, J., said in Scales v. George Thompson Co. Ltd.-(1927) 13 Tax Cases 83 (KB): 'Was there any inter-connection, any interlacing, any inter-dependence, and unity at all embracing those two businesses ' That inter-connection, inter-lacing, inter- dependence and unity are furnished in this case by the existence of common management, common business organis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... main consideration which has to prevail is whether, notwithstanding the fact that the assessee may close one activity, it does not interfere in carrying on of the other activity . The fact that one business cannot conveniently be carried on after the closure of the other may furnish a strong indication that the two businesses constitute the same business. But the decision of this Court in Prithvi Insurance Co., (Supra) shows that no decisive inference can be drawn from the fact that after the closure of one business, another may or may not conveniently be carried on, The CIT also overlooked that in the revision applications filed by the appellant, it was expressly stated that it was true that there was a common control and common management of the same Board of Directors of the business of import and export. Thus, the unity of control and the other circumstances adverted to above show that there was dovetailing or interlacing between the business of import and the business of export carried on by the assessee and that they constitute the same business. In the case of Karnataka Light Metal Industries (P) Ltd v Commissioner of Income Tax (supra), the assessee company was enga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stillery Ltd. vs . CIT : [1971]79ITR589(SC) the assessee was carrying on the business of manufacture of sugar and distillery as well as business of dealing in shares. The Supreme Court held that the share transactions as well as the business of manufacture of sugar and other commodity constitutes the same business within the meaning of s. 24(2) of the Indian IT Act, 1922. Referring to the decision of the King Bench in Scales vs. George Thompson Co. Ltd. (1927) 13 TC 83 (KB) Rowlatt J., had observed that before two or more businesses can be considered as 'the same business' they should not be easily separable and there must be a dovetailing of the one with the other. Adverting to the concepts of interconnection, interlacing, interdependence and unity, the Supreme Court observed, they are not free from ambiguity but certain objective tests have been laid down for finding out the existence of inter-connection, interlacing, interdependence or unity between two or more businesses. If a person is engaged in one activity of business and for some reason or the other that activity had to be closed down and wants to take up a new line of business it must be said that he is not carr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for this limited purpose, considering the period which has elapsed, the accounting period being year ended on 30th June, 1982. On the consideration of the decisions of the Apex Court referred herein above, the law laid down is 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. In the present case, 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. The finding of the Tribunal is the finding of fact and there is no ...this Court as well. In view of the above, we do not find any err ..... X X X X Extracts X X X X X X X X Extracts X X X X
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