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PETITIONER: SETABGUNJ SUGAR MILLS LTD.

       Vs.

RESPONDENT: THE COMMISSIONER OF INCOME-TAX,CENTRAL, CALCUTTA.

DATE OF JUDGMENT: 17/11/1960

BENCH: HIDAYATULLAH, M. BENCH: HIDAYATULLAH, M. KAPUR, J.L. SHAH, J.C.

CITATION:  1961 AIR  360            1961 SCR  (2) 488  CITATOR INFO :  F          1969 SC 946  (4)  RF         1978 SC1320  (9)

ACT: Income Tax-Company having several activities-Set-off of loss in one, when can be claimed against profits in  another-Whe- ther   activities  constitute  one  business   or   separate businesses-Mixed question of law and fact-Indian Income  Tax Act, 1922, (11 of 1922) SS. 24(2), 66(2).

HEADNOTE: The  appellant company which had different ventures  claimed to set off against the profits of one venture the losses  of its  other venture which were brought forward from the  back years, contending that the losses were of the same  business and  S.  24(2) of the Indian Income-tax  Act  applied.   The ’tribunal  rejected  the  appellants  contention  and   gave reasons why the various activities of the company could  not be construed as the same business for the application of  S. 24(2). The  company then asked the Tribunal to make a reference  to the High Court on questions of law arising out of Tribunal’s order.  The Tribunal declined to make a reference.  The com- pany moved the High Court of Calcutta, under s. 66(2) of 489 Income-tax  Act,  for calling upon the Tribunal to  state  a case  but  the  application was  summarily  dismissed.   The company  appealed  to the Supreme Court, by  special  leave, against  the decision of the Income-tax  Appellate  Tribunal and also the order of the  Calcutta High Court. Held,  that the question whether different ventures  carried on  by  an individual or a company form one  business  is  a mixed  question of law and facts.  The principle is to  find out  whether there is any interconnection, any  interlacing, any  interdependence,  any  unity  at  all,  embracing   the ventures  as  laid down in Scales v. George Thompson  &  Co. Ltd.   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  not  one business.  The ultimate conclusion is a legal inference from facts  proved  and  is one of mixed law and  fact  on  which

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application of S. 24(2) of the Act depends. In the instant case a question of law did arise on which the High  Court should have asked for a statement of  the  case. The   question  of  law  is  "whether  on  the   facts   and circumstances  of the case, the business activities  of  the company, to wit, manufacture and sale of sugar and sale  and purchase  of gunnies, jute, mustard seeds,  constituted  the same  business within the meaning of S. 24(2) of the  Indian Income-tax Act, 1922". The  High Court is directed to call for a statement  of  the case from the Tribunal and dispose of it according to law. Scales  v. George Thompson & Co. Ltd., (1927) 13 T.  C.  83, relied on.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 143 of 1958. Appeal  by Special Leave from the Judgment and  Order  dated the  15th March, 1955, of the Income-tax Appellate  Tribunal of India, Calcutta in I. T. A. No. 4309 of 1954. Civil Appeal No. 144 of 1958. Appeal  by Special Leave from the Judgment and  Order  dated the 27th April, 1956, of the Calcutta High Court in  Income- tax Matter No. 9 of 1956. N.A.  Palkhivala (In both the Appeals) and B. P.  Maheshwari for the Appellants. K.N. Rajagopal Sastri and D. Gupta for the Respondent. 1960.  November 17.  The Judgment of the Court was delivered by 62 490 HIDAYATULLAH,  J.-These  are  two  consolidated  appeals  by special leave.  The first is directed against ,.an order  of the  Income-tax  Appellate Tribunal,  Calcutta  Bench  dated March  15,  1955,  and the other, against an  order  of  the Calcutta  High Court dated April 27, 1956, declining to  ask for  a  statement of the case under s. 66(2) of  the  Indian Income-tax Act. The  facts are as follows: Setabgunj Sugar Mills,  Ltd.,  is the  appellant.  This Company was incorporated in 1934,  and was established to take over some sugar mills run by a firm. Included   in  the  objects  for  which  the   Company   was established was the business of buyers, sellers and  dealers in jute, gunnies, oil seeds, etc.  For the first few  years, the Company carried on the business of manufacture and  sale of  sugar  only.  In the accounting year ending  August  31, 1945, the Company had some transactions in gunnies and  made a  profit.   In the next accounting year ending  August  31, 1946,  the  Company made also a profit  in  transactions  in gunnies and jute.  In the accounting year ending August  31, 1947,  (corresponding  assessment year being  1948-49),  the Company  did business in mustard seeds, gunnies and  Hessian and  made profit.  After this assessment year,  the  Company ceased  to have any business other than the manufacture  and sale of sugar We   are  concerned  with  the  assessment   year   1948-49, corresponding to the accounting year ending August 31, 1947. In that year, the profits from the sale of gunnies,  mustard and jute amounted to Rs. 6,14,018.  Some-of the business was done by purchases or sales in the territory now in Pakistan. During the same accounting year, the sugar business resulted in  a loss of Rs. 2,09,306.  The loss in sugar business  was set off against the profits of the other businesses, and the Income-tax  Officer by his order assessed the Company on  an

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income  of  Rs. 4,04,712.  The Company claimed  to  set  off against  this profit, business losses of back years  in  its business in sugar amounting to Rs. 13,43,069, which had been brought  forward from the previous year.  The contention  of the Company was that these losses were of the same business, and 491 that  s. 24(2) of the Indian Income-tax Act  applied.   This contention  was  not accepted.  On appeal to  the  Appellate Assistant Commissioner, the contention of s the Company  was accepted.  The Commissioner of Income-tax then preferred  an appeal before the Income-  tax Appellate  Tribunal (Calcutta Bench),  which was allowed.  The Tribunal gave  reasons  why the various activities of the Company could not be construed as the same business for the application of s. 24(2). The  Company then asked the Tribunal to make a reference  to the  High Court on four questions of law which,  it  stated, arose out of the Tribunal’s order.  The Tribunal declined to make  a  reference.  The Company next moved the  High  Court under  s. 66(2) of the Act for calling upon the Tribunal  to state a case on the four questions, but its application  was summarily  dismissed.   The Company has  now,  with  special leave, appealed against the order of the Tribunal  reversing the  decision  of the Appellate Assistant  Commissioner  and also  against the order of the High Court declining to  call for a statement of the case. 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.   These principles were stated by Rowlatt,  J.  in Scales v. George Thompson & Co. Ltd. (1).  The learned Judge observed: "...........  the  real question is, was  there  any  inter- connection, any interlacing, any inter-dependence, any unity at all embracing those two businesses." The learned Judge also observed that what one had to see was whether  the  different ventures were so interlaced  and  so dovetailed  into  each  other  as  to  make  them  the  same business.  These principles have to be applied to the facts, before  a  legal inference can be drawn  that  a  particular business is composed of (1)  (1927) 13 T.C. 83, 89. 492 separate  businesses,  and is not one business.   No  doubt, findings of fact are involved, because a variety of  matters bearing   on   the  unity  of  the  business  have   to   be investigated,  such  as unity of  control  and   management, conduct of the business through the same agency, the  inter- relation of the businesses, the employment of same  capital, the  maintenance of common books of account,  employment  of same staff to run the business, the nature of the  different transactions,  the possibility of one being  closed  without affecting  the  texture of the other and  so  forth.   When, however,  the true facts have been determined, the  ultimate conclusion is a legal inference from proved facts, and it is one of mixed law and fact, on which depends the  application of  s. 24(2) of the Act.  In our opinion, a question of  law did  arise in the case, on which the High Court should  have asked for a statement of the case.  That question of law is: "Whether  on  the facts and circumstances of the  case,  the business  activities of the Company to wit, manufacture  and

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sale  of  sugar  and sale and  purchase  of  gunnies,  jute, mustard  seeds  constituted  the same  business  within  the meaning of s. 24(2) of the Indian Income-tax Act, 1922?" We  accordingly  allow Civil Appeal No. 144  of  1958,  with costs, and direct the High Court to call for a statement  of the case from the Tribunal on this question, and dispose  of it, according to law. As regards Civil Appeal No. 143 of 1958, which questions the order of the Tribunal, we express no opinion, though we  may state that the learned counsel for the Department  attempted to show that the order of the Tribunal in the  circumstances of the case was correct, and that no other decision but  the one given by the Tribunal was possible.  In view of the fact that  the  Appellate  Assistant Commissioner  had  drawn  an inference  contrary  to that of the Tribunal, it  cannot  be said  that the legal inference was one and one  alone.   We, however,  express  no  opinion either way,  because  we  are satisfied that a question of law did arise in the case,  and have,  therefore,  allowed  the other appeal,  so  that  the matter may be examined by 493 the High Court in the first instance, on a statement of  the case by the Tribunal. Civil Appeal No. 143 of 1958, will, therefore, be dismissed, but without any order as to costs.                      C.  A. No. 144 of 1958 allowed.                      C.  A. No. 143 of 1958 dismissed.