Velu Pillai, J.
1. This reference is under Section 66 (2) of the Indian Income-tax Act, 1922 and concerns the assessment years 1950-51 to 1954-55. The questions referred are the following:
'(1) Whether on the facts and in the circumstances of the case, the tribunal is justified in law in holding that the purchase and sale of cashew and the manufacture of tin containers, constituted two different businesses and
(2) Whether on the facts and the circumstances of the case, the disallowance of Rupees 27,700/-, Rs. 28,212/-, Rs. 29,813/-, Rs. 32,128 and Rs. 44,001/-, representing the interests paid on capital borrowed for purposes of the business is lawful?'
The assessee commenced in the year 1944 a business, which consisted at the time, of buying, processing, and selling cashewnuts. From the year 1946, he also engaged himself in the manufacture of tin-cans for canning processed cashew-nuts. Apparently, the manufacture of tin-cans proved more profitable and after the year 1948 he stopped doing business in cashew-nuts, except that in the year 1940, he disposed of cashewnuts which remained in stock worth Rs. 822-14-0. Later, he embarked on a third venture, that of manufacture of oil, the manufacture of tin-cans continuing. He had made large borrowings from a bank, which amounted at the end of the year 1946, to over 1 lakh and forty-thousand and at the end of the year 1949 to over 4 1/2 lakhs.
In assessment proceedings against him, the question arose whether Interest paid by him to the bank in respect of the borrowings in relation to the venture on cashew-nuts which, as stated, had come to an end in the year 1948 or 1949, constituted admissible deductions from his income from business during the concerned assessment years. The question depended on whether the ventures carried on by the assessee from the year 1944 in respect of cashew-nuts, tins-cans and oil, constituted but one business. If they did, there was no dispute that interest paid on the borrowings relateable to the cashew-venture is deductible from the income.
The appellate Tribunal recorded its finding, if it may be called a finding in these terms:
'There is no basis for holding that the business in cashew and tin were the same, for, in the accounting year concerned, only the opening stock was disposed of. As far as we are able to see, the sole ground for coming to this conclusion was, that cashew nut and tin-cans are different commodities. The question whether separate ventures or activities constitute one business or not, is as held by the Supreme Court in Setabganj Sugar Mills Ltd. v. Commissioner of Income-tax, Central Calcutta : (1961)ILLJ211SC a mixed question of law and fact. The Supreme Court also laid down:
'Certain principles are applied to determine whether on the facts found, a legal inference can be drawn that the different ventures constitute separate business or viewed together, can be said to constitute the same business. These principles were stated by Rowlatt, J. In Scales v. George Thompson & Co. Ltd. (1927) 18 Tax Cas. 83. The learned Judge observed:
'.. .. .. the real question is, was there any Inter-connection, any inter-lacing, any interdependence, any unity at all embracing those two businesses.
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 mangement conduct of the business through the same agency, the inter-relation 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.' in Soundrapandia Naddar and Bros. v. Commissioner of Income-tax, Madras, : 18ITR163(Mad) Viswanatha Sastri, J. observed as follows:
'On the other hand, the fact that different lines of business are pursued or different commodities are bought and sold by a single person, firm or company does not necessarily mean that there are different businesses..... If two lines of business belong to the same person and are connected with the same trade, the one being ancillary or subsidiary to the other, if they are owned, controlled and financed in common, if the staff employed and the place of business are the same and if common accounts are kept, it may readily be inferred that the two lines of business are really part of the same business.. .. But it is not to be assumed that all these features must be present in every case or that the absence of one or more of them is fatal to the claim that the different lines of business are really parts of the same business.'
2. In the light of the first question referred, the history of the business, soon after the manufacture of tincans commenced, is relevant. The Tribunal expressed itself thus:
'Till 1948 the cashewnut business and tin factory were looked after by a common manager. The staff was common to both. There was only one Bank account.
For all the three ventures, there was identity of ownership, of management, of employees, and of capital by borrowing. The venture on tin-cans was, to start with, ancillary or subsidiary to that on cashew-nuts, until by a gradual shifting of emphasis, the former developed and the latter ended. Though the questionraised does not specifically refer to the third: venture, whether manufacture of tin-carts is ancillary to the manufacture of oil or not, the other elements are common. On the above facts which appear from the statement of the case itself, we have no doubt that the only inference that can be made, is that the three venture were parts of the same business. Accordingly we answer the first question referred in the negative, that is, against the department and in favour of the assessee.
3. As for the second question referred, the department has a case, and the statement of the case has also disclosed in paragraph 12, that part of the borrowing from the bank, was on account of personal drawings. This cannot be overlooked, although the question referred makes no mention of it. The tribunal has not stated what is the amount of such personal drawings. The amount of interest to be deducted can only be, that which is related to the borrowing on account of the business. In this view, we can only answer the second question as follows: the disallowance of the amounts of interest for the years in question attributable to the borrowing as on the 1st January, 1949, in respect of the venture on cashewnuts is not lawful; in other words, the amounts by way of interest accrued during the years on that part of the borrowing in respect of the venture on cashew-nuts have to be deducted.
4. The reference is answered as above; no costs.