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TMI Blog1978 (5) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... 88. From the assessment year 1954-55, that is to say, from the commencement of the calendar year 1953, the appellant started exporting cotton textiles instead of importing woollen fabrics which, as stated earlier, it had ceased to do towards the end of the calendar year 1952. The appellant claimed that the loss of Rs. 56,488 incurred by it on the import and sale of articles mentioned above should be set off against the profits made by it during the assessment years 1954-55, 1955-56 and 1956-57. The Income-tax Officer and the Appellate Assistant Commissioner rejected the appellant's claim on the ground that the business of importing and selling goods was distinct and separate from the business of exporting goods; and since the import business which the appellant was doing till the commencement of the assessment year 1953-54, and the export business which it commenced in the assessment year 1954-55 did not constitute the same business and as the business of import in which the loss was suffered was discontinued or did not exist in the assessment years 1954-55 to 1956-57, the unabsorbed loss of the assessment year 1953-54 could not be set off against the profits realised from the ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng on business in diverse commodities in the same year and the import business was stopped in subsequent years. Consequently, the Commissioner rejected the revision applications pertaining to the three assessment years. These appeals by special leave are directed against the orders passed by the Commissioner. Section 6 of the Indian Income-tax Act, 1922, which corresponds to section 14 of the Act of 1961, classified all incomes for the purposes of charge of income-tax and computation of total income under six heads, the fourth being "Profits and gains of business, profession or vocation". Section 10(1) 650 of the Act of 1922 taxed the profits of business, profession or vocation carried on by the assessee. By section 24(1) of that Act any assessee who sustained a loss of profits or gains for any year under any of the heads mentioned in section 6 was entitled to have the amount of the loss set off against his income, profits or gains under any other head in that year. Section 24(2), prior to its amendment by the Finance Act, 1955, read thus: "Where any assessee sustains a loss of profits or gains in any year, being a previous year not earlier than the previous year for the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon whether the assessee still carries on the business in which the loss was incurred. That involves consideration of the question whether the business carried on by the assessee is the same which he was carrying on when he suffered a loss. Under section 24(2) of the Act of 1922, an unabsorbed loss could be carried forward to be set off against the profits of a subsequent year or years, only if such profits accrued to the assessee from the same business and not otherwise. It is elementary that, in law, the two words "same" and "similar" connote different concepts and, therefore, the carrying on of a similar business will not meet the requirements of the section. The business has to be the same as before. But, though this is so, it is not possible to evolve a satisfactory test of universal application for determining whether the business which an assessee carries on in a year in which he has made profits against which a carried forward loss could be set off, is the same business which he was carrying on in the year in which he incurred the loss. Decided cases to which we will presently refer show that the determination of the question whether an assessee is carrying on in two dif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istrative organisation and the expenses incurred both for administration and for heads of expenditure such as salary of the staff, postage, staff welfare fund and general charges, were common. The question was whether the unabsorbed losses of the respondent-company for the assessment year 1950-51 and earlier years in respect of life insurance business could be set off against its profits of the general insurance business for the assessment years 1951-52 to 1954-55 under section 24(2) of the Indian Income-tax Act, 1922. Speaking for the court, Shah J. adopted the test evolved by Rowlatt J. as a "fairly adequate test" for determining whether the two businesses constituted the same business and held: "That inter-connection, inter-lacing, inter-dependence and unity are furnished in this case by the existence of common management, common business organisation, common administration, common fund and a common place of business." The court rejected the Commissioner's argument that whether one of the businesses can be closed without affecting the conduct of the other business was a decisive test in determining whether the two constituted the same business within the meaning of section 24(2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Standard Refinery and Distillery Ltd. v. Commissioner of Income-tax [1971] 79 ITR 589 (SC). The appellant, which owned a distillery and had acquired a sugar refinery, obtained on lease a sugar and gur refining company with effect from June 1, 1945. The appellant purchased a certain number of shares of that company in 1946 and sold them in 1947 at a loss. A part of this loss was unabsorbed and the question which arose for consideration was whether the appellant could carry forward that loss and set it off against the income from sugar manufacturing and distillery for the subsequent year. Hegde J., speaking for the court, observed that the concepts of inter-connection and inter-lacing, inter-dependence and unity were not free from ambiguity but that this court had laid down in Prithvi Insurance Co. [1967] 63 ITR 632 (SC) and Produce Exchange Corporation [1970] 77 ITR 739 (SC) certain objective tests for finding out the existence of inter-connection, inter-lacing, inter-dependence and unity between two or more businesses. On an application of those objective tests, to which we have already referred, the court set aside the judgment of the High Court and upheld the view of the Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X
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