MANCHANDA J. - This and the connected references arise out of statements of the case submitted to this court by the Income-tax Appellate Tribunal, Allahabad Bench. The questions that have been formulated by the Tribunal in this reference are :
'1. Whether on the facts of the case, the loss of Rs. 21,881 in Tata deferred shares is an admissible deduction in the determination of the net income, profits and gains from business under section 10 of the Income-tax Act ?
2. Whether, on the facts and in the circumstances of the case, dealings in shares, cotton waste and money-lending constitute the same business within the meaning of section 24(2) of the Income-tax Act ?'
The question formulated by the Tribunal in each of the connected references is :
'Whether, on the facts and in the circumstances of the case, dealings in cloth, shares, brokerage and money-lending constituted the same business within the meaning of section 24(2) of the Income-tax Act ?'
This question is practically the same as question No. 2 formulated in this reference.
The assessee is the same in all the three references, it being a private limited company deriving income from business in shares, brokerage, money-lending, dividends, business in cloth and business in cotton waste. The instant reference relates to the assessment year 1953-54 and the connected references relate to the assessment years 1950-51 and 1952-53. The assessment for the assessment year 1951-52 is not in dispute. The income derived or the loss suffered by the assessee in the assessment years 1948-49 to 1952-53 from various heads of income will appear from the following statement :
Interest on money-lending
Sales of braces
It will be noticed that in the assessment years 1948-49, 1951-52 and subsequently the assessee did not do any business in cloth and any business in cotton waste in the assessment years 1948-49 up to 1951-52. In the assessment year 1948-49 it suffered a loss of Rs. 96,793.00, in 1949-50 a loss of Rs. 58,069.00 and in 1951-52 a loss of Rs. 1,126.00; it made a profit in the other assessment years. In the assessment year 1953-54 it also carried on a business in speculation by purchasing and selling deferred shares of a certain company; it did not take and did not give delivery of the shares. It suffered a loss of Rs. 21,881.00 in the transaction.
The assessee claimed the right to deduct the above-mentioned losses suffered by it from the profits of the assessment years in question and it is this claim that has given rise to the questions submitted to this court for its opinion.
In respect of the loss of Rs. 21,881 in speculative business, the Tribunal, following the decisions in Keshavlal Premchand v. Commissioner of Income-tax and Commissioner of Income-tax v. Ramgopal Kaniyalal, held that it could not be set off against the profits from other heads of income. As to whether the loss of Rs. 96,793, Rs. 58,669 and Rs. 1,126 in the assessment years 1948-49, 1949-50 and 1951-52 in the share business could be carried forward and set off against the income from cloth and waste cotton business was answered in the negative by the Tribunal, upon a consideration of various factors, and it was held that this could not be done as the two business, i.e., the share and jobbering business, were not the same business as cloth and cotton waste.
Upon a reference being asked, the aforesaid two questions have been referred to this court.
The first questions now stands concluded by a Division Bench decision of this court in Jagannath Mahadeo Prasad v. Commissioner of Income-tax (Income-tax Reference No. 130 of 1960 decided on April 14, 1964), where it was held that the loss from speculative dealings can be set off against the profits from other business for the purpose of computing the profits and gains under section 10(1) of the Act and that, for the purpose of computing the profits and gains from business under section 10, the proviso to section 24(1) has no application. In this view of the matter, question No. 1 is answered in the affirmative and in favour of the assessee.
The answer to the second question will depend solely on whether the finding of the Tribunal that the dealing in shares and the dealing in cotton waste and money-lending do not constitute the 'same business' is supported by material on the record and the legal inference drawn could have been drawn.
The case before the Tribunal proceeded on the ground that section 24(2) as it stood before its amendment in 1955 was applicable to these proceedings. In other words the essential condition for the application of section 24(2) was that the business in which the loss was incurred and which loss required to be carried forward and set off against the profits of business should be the 'same business'. The Tribunal, therefore, rightly considered this question, bearing in mind the principles which were laid down by Rowlatt J. in Scales v. George Thompson & Co. and have since been followed by courts not only in England but also in India. The Tribunal found :
(1) That the main business of the assessee was that of a dealer in shares.
(2) That the business in cotton or waste could not in any sense be said to be the same as the main business in share dealing.
(3) That the cotton or waste business could not even be said to be ancillary to the main business.
(4) That the two businesses could be easily separated and discontinued without in any way affecting the other.
The fact that common capital was employed for the two businesses or that the staff employed was the same was duly considered and on the decision of the Bombay High Court in Manilal Dahyabhai v. Commissioner of Income-tax, the facts of which case were said to be more or less parallel to the present case, the Tribunal held the two businesses of cotton and waste not to be the same business as share dealing and jobbering.
Mr. Brij Lal Gupta, the learned counsel for the assessee, has contended that the legal inference drawn by the Tribunal from the facts found that the two businesses did not constitute the same business was unjustified. This cannot be acceded to. There was undoubtedly material before the Tribunal for the facts found by it. As set out here in above, various factors and circumstances were taken into consideration and the legal inference drawn there from that the two businesses were not the same business cannot be said to be erroneous or one which the Tribunal could not possibly have drawn. What Mr. Brij Lal Gupta wants this court to do, in a matter arising upon reference, is to reappraise the entire evidence and then to arrive at a finding whether the two businesses constitute the 'same business' within the meaning of section 24(2) of the Act. That is not the function of this court. What this court has to see in the first instance is whether there was any material for the findings of fact arrived at by the Tribunal and then to see whether the legal inference which the Tribunal has drawn could have been drawn by it. It is manifest that no single factor or circumstance can be said to be decisive in determining the question whether it is the 'same business' or two separate businesses. It is the cumulative effect of all the facts and circumstances of the particular case which will have to be considered. It is not possible nor is it desirable to attempt to lay down categorically the circumstances in which the conclusion that the two businesses were the same would necessarily follow. The principles are well settled and, so long as those principles have been borne in mind and applied to the facts of the particular case and the legal inference which the Tribunal has drawn is one that it could not have done.
Mr. Brij Lal Gupta, the learned counsel for the assessee, urged that the decision of the Bombay High Court, which the Tribunal had followed in Manilal Dahyabhai v. Commissioner of Income-tax, does not lay down the correct law because the two tests which were considered to be important were not necessarily so in view of the decision of the Supreme Court in Setabganj Sugar Mills Ltd. v. Commissioner of Income-tax. The contention is without force. The learned judges of the Bombay High Court have now here said that they were laying down an infallible test for determining whether the two businesses are the same business or not. All that was said was that certain tests may be more important than others. It is, therefore, not correct to say that the force of the Bombay decision has in any way been watered down by the decision of the Supreme Court.
As already observed, it is the cumulative effect of all the facts and circumstances of the particular case which have to be taken into consideration in coming to a finding whether the two businesses are one or separate and distinct. In the present case all the material on record was duly considered in arriving at the findings of fact and the well-settled principles having been kept in mind by the Tribunal in drawing the legal inference from proved facts, it is not possible to say that the conclusion arrived at that the business of cloth and cotton waste was not the same as share and jobbering business was one which it could not possibly have arrived at.
For the reasons given above, the second question is also answered in the affirmative (sic) but against the assessee.
The reference is answered accordingly. As both parties have partly succeeded in this reference, they are left to bear their own costs. The Commissioner of Income-tax will however get his costs in Income-tax References Nos. 169 and 170 of 1962 which we assess at Rs. 100 in each case.