JAGDISH SAHAI J. - At the instance of the assessee, Messrs. Shadi Ram Ganga Prasad (hereinafter referred to as 'the assessee'), the Income-tax Appellate Tribunal, Allahabad Bench (hereinafter referred to as 'the Tribunal'), has submitted a statement of case and referred the following question of law to this court under section 66 (1) of the Income-tax Act, 1922 (hereinafter referred to as 'the Act') :
'Whether, on the facts and in the circumstances of the case, the assessee is entitled to deduct the entire loss from milling business of Rs. 57,980 relating to assessment year 1948-49 from the profits of the same business in the material year of only the loss as reduced by the speculation profits of 1948-49 ?'
The present case relates to the assessment year 1949-50.
The assessee is a Hindu undivided family and carried on milling as also speculation business. The profits and loss position of the preceding three years is as follows :
Total profits or loss as per assessment
Profit or loss from speculation business
Profit year or loss from milling business
In the relevant assessment year (1949-50), the assessee received some income from property and a sum of Rs. 1,571 from speculation business and a further sum of Rs. 2,57,831 from milling business. The Income-tax Officer, acting under the provisions of section 24(2) of the Act, set off part of the speculation loss of earlier years to the extent of Rs. 1,571 wiping out the speculation profits of the material year. With regard to the milling business profits, he set off a sum of Rs. 31,830 and a further sum of Rs. 63,659 of loss of 1946-47 and 1947-48, respectively. He also set off a sum of Rs. 21,714 from the milling business for the year 1948-49. Thus, he allowed a total loss of Rs. 1,17,203 and, after deducting this amount from the profits of the milling business which as said earlier, was Rs. 2,57,831, fixed the net business income of the assessee for the year 1959-60 at Rs. 1,40,628. The assessee also received an income from property this year which the Income-tax Officer added back with the result that the assessment was made on Rs. 1,50,713.
The assessee appealed to the Appellate Assistant Commissioner and to the Tribunal successively but without success. Thereafter, as already stated earlier, the present reference to this court was made by the Tribunal at the instance of the assessee.
The contention of the assessee before us, as it was before the Tribunal and the Appellate Assistant Commissioner, is that in the year 1948-49 the profit ended in the speculation business should have been set off towards the loss of Rs. 75,932 in the same business in the year 1947-48 with the result that no profit should have been shown in the year 1948-49 but a loss should have been shown to the extent of Rs. 39,666 i.e., the sum arrived at after subtracting Rs. 36,266 from Rs. 75,932. It was also contended that the sum of Rs. 39,666 should have been added to Rs. 57,980 the loss from milling business, and the total loss for the year 1948-49 should have been shown at the figure of Rs. 97,646 (the total of Rs. 39,666 and Rs. 57,980) and not Rs. 21,740. The submission on behalf of the assessee is that the provisions of section 24(2) of the Act require that the loss of the preceding year should be set of from the profits of the subsequent year earned from the same business. For this, leaned counsel placed reliance upon the following words occurring in section 24(2) of the Act :
'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 assessment for the year ending on the 31st day of March, 1940, under the head Profits and gain of business, profession or vocation, and the loss cannot be wholly set off under sub-section (1), the portion not so set off shall be carried forward to the following year and set off against the profits and gains, if any, of the assessee from the same business, profession or vocation for that year; and if it cannot be wholly so set off, the amount of loss not so set off shall be carried forward to the following year, and so on; but no loss shall be so carried forward for more than six years...'
The argument if that the expression 'from the same business' means that particular business amongst many in which loss has occurred. It is urged that in the present case the same business would be business from speculation. We are unable to agree. In our opinion, the expression 'from the same business, profession or vocation' means the business, profession or vocation which has been carried forward from the preceding year and not a new business, profession or vocation.
It would appear that this sub-section also uses the words 'other heads of income'. Section 6 of the Act enumerates the following six heads of income chargeable to income-tax :
(ii) Interest on securities.
(iii) Income from property.
(iv) Profits and gains of business, profession or vocation.
(v) Income from other sources.
(vi) Capital gains.'
It would follow from this that business is a head by itself and even when a person carried on several kinds of business the head would still be business for the purpose of income-tax assessment. Therefore, when section 24 speaks of business and set off against the profits and gains of the assessee from the business, the business as a whole and not the several separate items of business that the assessee is carrying on is intended. In other words, the assessee may be carrying on business of several types but for the purpose of assessment all the business will be taken together one head as business. Section 10 of the Act provides that 'tax shall be payable by an assessee under the head profits and gains of business, profession vocation in respect of the profits or gains of any business, profession vocation carried on by him'. It follows from this that income from all the sources of business it to be included under the head business. For this reason we are of the opinion, that, though the assessee was carrying on two kinds of business, i.e., speculation business and milling business, the two were to be treated under one common head as business for the purpose of assessment under section 10 of the Act. We have already said above that the same business means a business that is carried forward as a whole without keeping any distinction inter se between the several kinds of business that an assessee may be carrying on. In that view of the matter we are satisfied that the Income-tax Officer was right in deducting a sum of Rs. 36,266, the profits in the speculation business in the year 1948-49, from Rs. 57,980, the loss in the milling business. For this reason the Income-tax Officer was right in showing the loss in the year 1948-49 at the figure of Rs. 21,714. In our judgment, the Tribunal and the Appellate Assistant Commissioner were right in affirming the assessment made by the Income-tax Officer.
For the reason mentioned above, we answer the question referred to us by saying that the assessee is not entitled to deduct the entire loss from the milling business of Rs. 57,910 relating to the year 1948-49 from the profits of the same business but only the loss as reduced by the speculation profits of 1948-49. The assessee shall pay to the department the costs of these proceedings which we assess at Rs. 200. We fix the fee of the learned counsel for the the department at the same figure.