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TMI Blog1966 (8) TMI 82X X X X Extracts X X X X X X X X Extracts X X X X ..... s ₹ 13,46,628 inclusive of the loss of ₹ 86,171 suffered in tea shares. The assessee conceded that the loss in tea shares could not be set off against the income from business. It, however, claimed that the loss in respect of other share dealings, i.e., ₹ 12,60,457 (₹ 13,46,628 minus ₹ 86,171), suffered in the preceding assessment year and carried forward should be set off against the profits from the textile mills determined in the relevant assessment year because both the activities of dealing in stocks and shares and textile manufacturing constituted one and the same business, as the capital, staff and business premises employed were common and these transactions were entered in the same account books and incorporated in one profit and loss account and balance-sheet. The Income-tax Officer disallowed the claim of the assessee and held that the business of manufacturing textiles and dealing in stocks and shares was not the same business . The Appellate Assistant Commissioner and the Tribunal affirmed this view. Hence, this reference at the instance of the assessee. The relevant provision that falls to be considered is section 24(2) of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey might stop the ships and it does not affect the underwriting . Rowlatt J., after laying down the above tests, considered that the method of book-keeping or the drawing up of a profit and loss account would not throw any light upon this matter at all. He again reiterated: I think the real question is, was there any inter-connection, any inter-lacing, any inter-dependence, any unity at all embracing those two businesses; and I should have thought, if it was a question for me, that there was none. But I do not think it was a question of law. I think the Commissioners had ample evidence upon which they could decide, and they did so decide . This picturesque language in which the test was propounded of interconnection, inter-lacing, inter-dependence and dovetailing has become classic, but, in applying it, various courts have stressed different aspects thereof from time to time. In some the stress has been on the common ownership of the business, in others the distinct nature of the two businesses carried on. The existence of a common capital account, business premises, staff, profit and loss account have been held not to prove any conclusive test. The Madras High C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses, as the Tribunal had found that the two businesses had separate sets of books of accounts and separate profit and loss accounts and there was no inter-dependence or inter-connection between the two businesses. The question here also was treated as one essentially of fact. In Commissioner of Income-tax v. International Industries Ltd. [1952] 22 ITR 44, it was held that the business of manufacturing and dealing in celluloid articles was different from a managing agency business and share transactions. The question again was treated as one primarily, if not wholly, of fact. In Commissioner of Income-tax v. Pfaff Sewing Machine Co. ( India) Ltd. [1956] 30 ITR 518 the Punjab High Court held that as the assessee-company was formed primarily to deal in sewing machines but owing to the outbreak of war it had to switch over to dealings in shares and after the termination of hostilities it resumed its business in sewing machines, the business of share dealing and of selling sewing machines was held to constitute one business. In Manilal Dahyabhai v. Commissioner of Income-tax [1959] 37 ITR 398, the assessee was carrying on business as wholesale dealer in cloth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning of section 24(2) of the Act. Each case must depend on its own facts and circumstances. The burden of proving that the businesses are the same must initially rest on the assessee where the very nature of the two businesses is, prima facie, not the same. In the present case, prima facie, the manufacture of textiles and dealing in shares cannot be said to be the same business. After the assessee had led evidence and placed all material on the record, then it was for the final fact-finding body to arrive at a decision as to whether those facts and circumstances do constitute any inter-lacing, inter-connection or ' dovetailing. The question in the ultimate analysis would be a mixed question of fact and law, as laid down by the Supreme Court in Setabganj Sugar Mills Ltd. v. Commissioner of Income-tax [1961] 41 ITR 272. In the present case, the Tribunal, taking into consideration the cumulative effect of all the facts and circumstances, concluded that the business was not the same business. In so doing, I am satisfied that the principles applicable were clearly kept in mind and it did not misdirect itself in any manner nor did it rely on any assumptions or conjectures. In these c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acture and sale of sugar and sale and purchase of gunnies, jute, mustard seeds constituted the same business within the meaning of section 24(2) of the Indian Income-tax Act, 1922' ? In that case, their Lordships of the Supreme Court had adopted the tests laid down by Rowlatt J. in Scales v. George Thompson Co. Ltd [1927] 13 Tax Cas. 83: ...the real question is, was there any inter-connection, any inter-lacing, any inter-dependence, any unity at all embracing those two businesses . The Supreme Court pointed out that these principles have to be applied to the facts, before a legal inference can be drawn that a particular business is composed of separate businesses and is not the same one . It held: The question whether, on the application of the settled tests, different ventures carried on by an individual or a company form the same business is a mixed question of law and fact. Certain principles are applied to determine whether on the facts found, a legal inference can be drawn that the different ventures constitute separate businesses or viewed together, can be said to constitute the same business . In that case, it was noted by the Supreme Court that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness of buying and selling shares had discharged the onus which, in such a case, lies upon the assessee to prove that the apparent difference in the two businesses conceals what can be described as an organic unity. Where there is such an organic unity, one type of business really dovetails into or is complementary of another type of business. In Setabganj Sugar Mill's case (supra) their Lordships of the Supreme Court were not dealing with the question of onus of proof. But, I find that this question was dealt with by Mitra J. in Standard Refinery and Distillery Ltd. v. Commissioner of Income-tax [1965] 55 ITR 139. There a Division Bench of the Calcutta High Court, considering a case of an assessee who carried on the business of manufacturing sugar as well as the business of buying and selling shares, just as in the case before us, held that in such cases the onus of proof lies upon the assessee to show that apparently different businesses really constituted one organically whole unit. In that case, the capital with which the business in shares was conducted was supplied by the business of manufacture and sale of sugar. The learned judges kept in view and discussed the Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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