S.K. Desai, J.
1. This is a reference made by the Income-tax Appellate Tribunal under section 66(1) of Income-tax Act. The reference was made at the instance of the Commissioner.
2. The assessee is private limited company registered on 19th January, 1959. We are concerned with the accounting year 19th January, 1959, to 31st December, 1959. The assessee-company was established mainly to carry on the business of manufacturing and selling spare parts and accessories of motor vehicles. Clauses 10 and 26 of the memorandum of association are the relevant clauses, though as usual under other clauses the company had the power to do each and every kind of business. Clause 10 permitted the company to buy, sell, import, export, manufacture, manipulate, treat, prepare and deal in merchandise, products, substances, commodities, articles and things of all kinds, and clause 26 permitted the company to manufacture and deal in all such stock-in-trade, goods, chattels, etc. The company went into production in 1960. In 1959, the balance-sheet shows that fixed assets of the value of Rs. 9,55,980 were installed. This amount included amount spent for building under construction and machinery under erection. There was no manufacture of spare parts in the account year. The company, however, purchased and sole automobile parts, the total sales amounting to Rs. 84,820. In the profit and loss account for the period ended 31st December, 1959, on the credit side, apart from the sales aforementioned, there was an item of interest. On the debit side, purchases and expenses totalled Rs. 1,15,495. The principles items of outgoings were insurance, miscellaneous expenses and interest. Only a small amount was claimed by way of depreciation which pertained to furniture and fittings. The net deficit in the profit and loss account was Rs. 30,159, and this was returned as the loss for the material assessment.
3. The Income-tax Officer, however, held that the said loss was not due to the business activities of the company, and the total income was computed at nil. The assessee carried the matter to the Appellate Assistant Commissioner who upheld the conclusion of the Income-tax Officer and dismissed the appeal. The assessee, thereafter, came in appeal before the Tribunal contending that the whole of the expenses should have been allowed. The Tribunal accepted the contention that, since the company had commenced business, it was entitled to deduct all expenses which would ordinarily be regarded as on revenue account, even if some of the expenses did not relate to the particular business activity carried on in the account year.
4. After scrutinising the details of the expenses the Tribunal allowed the claim of the assessee in full, except to the extent of Rs. 3,000 since the full details were not available in regard to this item.
5. The following question has been submitted for our consideration in this reference :
'Whether, on the facts and in the circumstances of the case, the Tribunal was justified in allowing a sum of Rs. 27,159 as business expenses during the year of account ?'
6. In my opinion, both the Tribunal's approach and conclusion are substantially unexceptionable. It has been observed by the Tribunal that there was no dispute that business activities had actually been commenced in the account year, and that there was also no dispute that the interest and the bulk of the other expenses were not incurred for the business of buying and selling spare parts. In the words of the Tribunal, 'the question however is, when once business is started, any allocation of the expenses incurred by the company on items which would ordinarily be regarded as on revenue account, is justified. In our opinion, there is no justification for such a view on the facts of this case. If separate business activities were carried on by the company involving the maintenance of separate sets of accounts, and preparation of separate profit and loss accounts, the income of each business would be computed separately and aggregated for arriving at the total business income under section 10. But, when only one set of account is maintained for all the business activities carried on, we are unable to see how the assessee's business income could be computed business-wise. As already stated, separate computation of income and expenditure would be justified only when several distinct business are carried on, which is not the case here. Judged by any test, all the business activities of the assessee during the account year can be regarded as only relating to the same business, and the disallowance of a part of the expenses is not justified.
7. Our attention was also drawn to a decision to a decision of the Supreme Court of India in the case of Produce Exchange Corporation Ltd. v. Commissioner of Income-tax  ITR 739. The appellant-company before the Supreme Court carried on business as dealer in diverse commodities and and also in stocks and shares. In the year of account 1949, it had suffered a loss of Rs. 3,71,700 in the sale of shares which the company claimed to carry forward and set off against the profits of subsequent years from transaction in other commodities. The Tribunal found that there was complete unity of control and shares were one of a number of commodities in which the company dealt in in the ordinary course of business and that there was no element of diversity or distinction or separateness about the transaction in shares, and, accordingly, upheld the claim. On a reference, the High Court held that the essential matter to be considered was the nature of the two lines of business and not merely their unity of control and that, therefore, the Tribunal erred in holding that the whole trading activity formed one business. On appeal, the Supreme Court held, reversing the decision of the High Court, that the decisive test was unity of control and not the nature of the two lines of business, and that the Tribunal was right in holding that the share business and other business carried on by the appellant-company constituted the same business within the meaning of section 24(2) as it stood before its amendment in 1955.
8. At page 742 of the report, there is a reference to an earlier decision of the Supreme Court in the case of Commissioner of Income-tax v. Prithvi Insurance Co. Ltd. : 63ITR632(SC) in which the test laid down by Rowlatt J. in Scales v. George Thompson & Co. Ltd.  13 TC 83 is set down with approval. The test which is described as fairly adequate is, 'was there any inter-connection, any inter-lacing any inter-dependence, any unity at all embracing those two businesses ?' It was further observed by the Supreme Court in Prithvi Insurance Company's case  ITR 632 that the inter-connection, inter-lacing inter-dependence and unity were furnished in the case before the Supreme Court by the the existence of common management, common business organisation, common administration, common fund and a common place of business. If one turns to clauses 10 and 26 of the memorandum of association of this private limited company it is clear that clause 26 empowers the company to manufacture the items in which it is permitted under clause 10 to deal in merchandise, products, substances, commodities, articles and things of all kinds, and apart from the test of the Supreme Court regarding common management, common control, etc., we have here essentially the same type of business, the two activities being two separate stages of the same business.
9. Accordingly, the question will be required to be answered in favour of the assessee.
10. I agree and have nothing to add.
11. The question is answered in the affirmative and in favour of the assessee. No order as to costs of the reference.