1. The Income-tax Appellate Tribunal, Delhi Bench 'A', has referred the following question to this court under Section 66(1) of the Indian I.T. Act, 1922 :
'Whether, on the facts and in the circumstances of the case, the loss of Rs. 19,783 was liable to be set off against the income of the assesses under the head 'Business' in the two years under reference ?'
2. The assessed, late Bhai Sunder Dass, is an individual. We are concerned with the assessment years 1958-59 and 1959-60, the relevant previous years being those ended on 12th April, 1958, and 12th April, 1959, respectively.
3. According to the assessed, he carried on a sole proprietary business in the name and style of Messrs. Gianchand Sunderdass (Gian Chand being the name of his brother) at Jhelum (now in Pakistan) till 1948. The business consisted of supplying stories and other building materials to the Government under contracts. While he was at Jhelum, he had submitted atender to the Central Government for supplying 20,000 boundary stones for the use of the Survey Department, and the same was accepted by the Government on May 24, 1947. A formal agreement was drawn up on 11th June, 1947, and the same was signed by Sunderdass for Messrs. Gian Chand Sunderdass. On 25th May, 1947, the assessed wrote to the Survey Department of India informing that he had 3,000 milestones ready for delivery at Tarki, but was not in a position to deliver the same at the stipulated site on account of non-availability of transport due to the disturbed political situation in the country. He requested, thereforee, that the survey department may make arrangement for transporting the stones from Tarki and for having them shaped into boundary stones at a total cost of Rs. 19,783. The Government did not respond to his request. As the transport was not made available, Sunderdass was not in a position to complete the contract till he migrated to India after the partition of the country. The stones were thus left at Tarki. After coming to India, Sunderdass offered to deliver the stones under the contract but without any success. The assessed then called upon the Pakistan Government to pay him compensation for the stones left behind. The assessed also made a similar claim for compensation to the Government of India. The Pakistan Government repudiated the assessed's claim on 26th March, 1957, which falls in the assessment year 1958-59, and the Indian Government also repudiated his claim on 26th July, 1958, which falls in the assessment year 1959-60.
4. After coming to India, the assessed entered into a partnership with his son, Sardar Singh, in the name of M/s. Bhai Sunderdass Sardar Singh, and started the business of constructing Government buildings under contracts. His share in the partnership was Rs. 0-9-6, while the share of Sardar Singh was Rs. 0-6-6. Separate accounts were being maintained for the new partnership business.
5. In the assessment years 1958-59 and 1959-60, the assessed claimed a deduction of the aforesaid loss of Rs. 19,783 out of the share of profit received by him from the firm of M/s. Bhai Sunderdass Sardar Singh. The ITO held that the assessed failed to prove the loss claimed by him and that, even otherwise, it was a capital loss. In that view, he rejected the assessed's claim.
6. The assessed preferred appeals to the AAC as regards the claim for deduction of the loss of Rs. 19,783. He took the view that, if at all it was a loss, it had taken place in the year 1947, that the contract business of supplying stones was stopped in 1948, and that the contention of the assessed that the said business of the firm, M/s. Gianchand Sunderdass, and the present business of the firm, M/s. Bhai Sunderdass Sardar Singh, were identical, was not acceptable. He, thereforee, rejected the assessed's claim and confirmed the orders of the ITO.
7. As the assessed had since died, his legal heir, S. Swinder Singh, preferred appeals to the Appellate Tribunal. It was contended on behalf of the assessed that the business carried on by the firm, M/s. Gianchand Sunderdass, was continued to be carried on by the firm of M/s. Bhai Sunderdass Sardar Singh, that the two businesses were one and the same, as the capital with which the former business was carried on was also the capital with which the present business was being carried on, and the staff which carried on the previous business also carried on the present business, and that the former business of supplying building material to the Government could not be regarded as being different in nature from the present business of constructing Government buildings under contracts. On the other hand, it was contended on behalf of the department that the former business was an extinct business and it was not correct to say that the former business was the very business which the firm, M/s. Bhai Sunderdass Sardar Singh, was carrying on during the relevant assessment years, that the names of the two firms were different, that the nature of the earlier business was also different from that of the present business, that separate accounts were started for the present business, and that in those circumstances the loss, if at all, was a trading loss of an extinct business and no deduction could be claimed by the assessed in the assessment years under consideration.
8. The Appellate Tribunal, by its order dated 29th March, 1967, held that the assessed proved that the loss of Rs. 19,783 was suffered in the course of the business carried on at Jhelum, and that it was a trading loss. The Tribunal, however, came to the conclusion that the two businesses were distinct businesses. It pointed out, inter alia, that there was no evidence to show that the present business was being carried on by the same organisation and employees which carried on the previous business, that the business of supplying stones and other building materials differed materially from the business of constructing Government buildings under contracts, and that the previous business was being carried on by the assessed as a sole proprietor, while the present business was being carried on by the firm in which the assessed was only a partner. In that view, the Tribunal rejected the claim of the assessed for deduction of the loss on the ground that the said loss, though a trading loss, had arisen from an extinct business.
9. The legal heir of the assessed thereupon filed an application under Section 66(1) of the Indian I.T. Act, 1922, praying that the question of law which we have set out earlier may be referred to this court, and hence the present reference.
10. The answer to the question referred depends on the answer to the question as to whether the two businesses were distinct. If they were distinct businesses as held by the Appellate Tribunal, the answer to the question referred would be in the negative. On the other hand, if the two businesses were the same as contended by the assessed, the answer to the question referred would be in the affirmative.
11. The question as to whether any two businesses are the same or are different, has to be answered on a consideration of the facts of each case. In doing so, it would be helpful to keep in view the indicia suggested by Rowlatt J. in Scales v. George Thompson & Co. Ltd.  13 TC 83 , which have since been applied in various subsequent rulings (vide K. S. S. Soundrapandia Nadar & Brothers v. CIT : 18ITR163(Mad) , Setabganj Sugar Mills Ltd. v. CIT : 41ITR272(SC) and CIT v. Prithvi Insurance Co. Ltd. : 63ITR632(SC) . The observation of the learned judge containing the indicia ran as follows (at page 89):
'I think the real question is, was there any interconnection, any interlacing, any interdependence, any unity at all embracing those two businesses,'
12. In the case of Setabganj Sugar Mills Ltd. : 41ITR272(SC) , the Supreme Court of India, after referring to the aforesaid observation of Rowlatt J., observed as follows (at page 274):
'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 into 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 separate businesses, and is not the same one. 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 interrelation 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 Section 24(2) of the Act, (of 1922).'
13. In the case of CIT v. Prithvi Insurance Co. : 63ITR632(SC) , the Supreme Court of India, after referring to the observation of Rowlatt J. with approval, held on. the facts of the case before it as under (at page 638):
'That interconnection, interlacing, interdependence and unity are furnished in this case by the existence of common management, common business organisation, common administration, common fund and a common place of business.'
14. In the present case, as pointed out by the Tribunal, there is no evidence to show that the present business was being carried on by the sameorganisation and employees which carried on the previous business. The previous business of supplying stones and other building materials was materially different in its nature from the subsequent business of constructing Government buildings under contracts. Also, the previous business was being carried on by the assessed as a sole proprietor, while the subsequent business was being carried on by a firm in which the assessed was only a partner. The names of the firms were also different. Further, separate accounts were being maintained for the subsequent partnership business. It is in view of the said facts that the Tribunal took the view that the two businesses were distinct businesses, and the earlier business had become extinct. In the absence of any other circumstance to the contrary, we are of the opinion that the view taken by the Tribunal is correct.
15. The learned counsel for the assessed sought to contend that the money employed in the two businesses was the same. The Tribunal did not record a clear finding as to whether the money employed was the same. However, even assuming it was the same, it would not, as pointed out by the Tribunal, make any difference. If two businesses are being run simultaneously with the aid of a common fund, it can be said to indicate the unity of the two businesses. But, when two businesses, as in the present case, were not simultaneously conducted, but one followed the other, the mere fact that the money employed in the previous business was being utilised in the subsequent business, would not by itself be a sufficient circumstance to hold that the two businesses were the same and not distinct. We are, thereforee, unable to accept the contention of the learned counsel for the assessed.
16. The learned counsel next sought to urge that the two businesses should be held to be the same as they were of the same nature. He submitted that the assessed was previously carrying on the business as a Government contractor and the subsequent firm, M/s. Sunderdass & Sons, also carried on the business as a Government contractor, and that there was thus a nexus and interconnection between the two. There is no force in the said contention. The earlier business consisted of supplying, i.e., selling stones and other building materials to the Government tinder contracts at tendered rates. The subsequent business consisted of constructing buildings for the Government under contracts. There is a marked difference between the two. The former consisted of selling articles to the Government, while the latter does not involve any transaction of sale between, the assessed and the Government. Each of the two businesses had thus a distinctive nature and character. The mere fact that in both the cases contracts were executed between the assessed and the Government does not, in our opinion, amount to such an interconnection or nexus aswould make the two businesses the same business. The entering into contracts had, as such, nothing to do with the businesses. The suggestion of the learned counsel that in both the cases the business was 'Government contract business', cannot be accepted. The entering into the contracts was not by itself the business. The business, as stated earlier, consisted previously of selling stones and other articles at contract rates, and subsequently of constructing buildings.
17. Mr. Verma, learned counsel for the revenue, sought to urge that the loss was not in the previous years in question but was in 1947, relying on an observation in the order of the AAC at page 25 of the paper book, viz., that 'it is clear from these facts that this loss, if at all is a loss, is for the year 1947'. The said observation does not seem to be correct. Everybody proceeded before the Tribunal on the basis that the loss occurred in 1957 and 1958 when the Governments of Pakistan and India refused to pay respectively. However, we pointed out to the learned counsel that he was not entitled to raise this point in this reference as this aspect was not raised before the Tribunal and cannot, thereforee, be said to arise out of the impugned order of the Tribunal.
18. For the foregoing reasons, we agree with the view taken by the Appellate Tribunal that the two businesses were distinctive, that the previous business was an extinct business, that the loss was a trading loss of an extinct business, and that no deduction could be claimed by the assessed in the assessment years under consideration. We, accordingly, answer the question referred in the negative in favor of the revenue and against the assessed.
19. In the circumstances of the case, we direct the parties to bear their own costs.