S. C. MANCHANDA J. - This is a consolidated case stated under section 66(2) of the Income-tax Act, 1922, in respect of assessment years 1950-51 and 1951-52. The question referred is :
'Whether having regard to the nature of the various activities and the other facts and circumstance of the case the business carried on by the assessee at the time which the claim under section 25(4) was made was the same business on which tax under the act of 1918 was paid and whether relief under section 25(4) was or not allowable ?'
There was a Hindu undivided family styled Nihal Chand Kishori Lal. It was dealing in various kinds of grains and oil seeds. That business of the Hindu undivided family was charged to tax under the provision of the Indian Income-tax Act, 1918. Later on, the Hindu undivided family business was taken over by a registered firm consisting of the members of the Hindu undivided family as its partners. It is this firm which is the assessee in the present case. The newly constituted firm continued the business under the same name and style, viz., Nihal Chand Kishori Lal. The first assessment of the registered firm was made in the year 1927-28 and continued to be assessed right up to 1950-51, which is the first of the two relevant assessment years. Out of the funds of she assessee-firm three mills were purchased :
(1) In the previous year relevant to the assessment year 1931-32 an oil mill at Bans Mandi at Kanpur from Messrs. Torbas Campbell & Co. of Bombay for a sum of Rs. 26,000.
(2) In the previous year relevant to the assessment year 1934-35 an oil mill at Etawa from the court of Wards for a sum of Rs. 16,500; and,
(3) In the previous year relevant to the assessment year 1936-37 an oil mill at Kanpur from L. C. DSouza for Rs. 13,000.
The business of all these three mills was to manufacture oil from oil seeds, cotton ginning and dal manufacturing.
In the previous year relevant to the assessement year 1936-37, the assessee also purchased a shop which was carrying on business in grains and sugar, and in the following previous year relevant to the assessment year 1937-38 another grain shop was purchased at Bharthana. All these business were carried on by the assessee up to 9th March, when they were taken over by a private limited company styled N. K. Industries Ltd.
For the assessment year 1950-51, the previous year whereof ended on the 7th July, 1949, the assessee produced account books for a period of 21 months, i.e., from July 8, 1948, to March 29, 1950. As all the businesses after that date (March 29, 1950) were taken over by a company, the assessee claimed relief under section 25(4) of the Act, in respect of the above businesses in the assessment for the year 1951-52. The Income-tax Officer allowed the assessees claim, inasmuch as, in his opinion, the claim was admissible, by his order dated 21st March, 1955.
The Commissioner, on a perusal of the records of the case, was of the opinion that the said order of the Income-tax Officer was erroneous and prejudicial to revenue and he, therefore, sought to revise it in the exercise of his revisional powers under section 33B of the Act. After due notice to the assessee, the Commissioner of Income-tax held that the business of oil mills was not a part of the business in foodgrains and oil seeds which had suffered tax under the Income-tax Act, 1918, and the assessee was, therefore not entitled to the relief claimed under section 25(4).
Aggrieved by the order of the Commissioner of Income-tax, the assessee filed an appeal before the Tribunal and contended that the business aforesaid of the three oil mills between 1931-32 to 1936-37 was merely an extension or enlargement of the old business of purchase and sale of oil seeds for the main reasons (1) that the necessary finance for the purchase of the mills was furnished by the Hindu undivided family and they were under the management and control of the family and (2) that the dealing in oil seeds was not different from the manufacture of oil and that the dealing in oil seeds was the same business as manufacture of oil. The Tribunal on a consideration of all the materials on the record came to the conclusion that the crushing and manufacture of oil was a totally different business from dealing in grain and oil seeds. Hence this reference at the instance of the assessee.
The question set out hereinabove assumes that the provisions of section 25(4) require that there should be identity of the business upon which tax was charged under the Act of 1918 and the one which was succeed to. That would appear to be a proposition accepted by the assessee. It is, therefore, too late in the day for Mr. Jagdish Swarup, learned counsel for the assessee, to argue, as he attempted to do, that the provisions of section 25(4) did not require that the business on which tax was charged under the Act of 1918 should be the same business which was being succeeded to. The question is explicit and not couched widely and, therefore, it is not even open to Mr. Jagdish Swarup to contend that the question that he now wishes to raise is only a different facet of the question which has been referred to this court. In substance, therefore, on the question as referred, the only point which falls to be considered is whether dealing in oil seeds is the same business as the manufacture of oil. There cannot be any serious doubt that the two activities are quite separate and have nothing common between them except oil seeds. When a dealer or trader in oil seeds buys and sells he has no concern with the manufacture. He buys and sells ready goods. A manufacturer sets up a factory which the necessary machinery and buys raw material and converts it into the finished product. It is, therefore, not possible to equate a trading activity with a manufacturing business.
Having considered the material on the record and the findings given by the Tribunal, in our opinion, it is not possible to say that the Tribunal misdirected itself in any way or that the finding arrived at by it that the business which was charged to tax under the Act of 1918 was not the same business as was succeeded to in 1950 is vitiated by any error of law.
For the reasons given above, we would answer the question referred against the assessee. The assessee will pay the costs of this reference, which we assess at Rs. 200. Counsels fee is also assessed at Rs. 250. The reference is answered accordingly.