Madhavan Nair, J.
1. The question referred to us by the Income Tax Commissioner is:
Where an assessee carrying on a mica business is obliged to stop it on account of a cyclone but still incurs expenditure during the year of account with the intention of resuming the same if conditions and prospects proved favourable but the business in fact was never resumed, is the expenditure so incurred allowable as a deduction against the profits and gains of the assessee's other business.
2. The facts are these: The assessee is a company incorporated under the Indian Companies Act. The company carried on business in motor accessories at Madras, Bombay, Coimbatore and Ootacamund, and in mica mine at Nellore. In this reference before us we are concerned with a sum of Rs. 5,420 which the company claims it is entitled to deduct for expenses incurred in carrying on the mica business. The mining business was started at Nellore in 1926. It was worked till November 1927, when the production was stopped on account of a cyclone. With a view to resume of the production, the company did some prospecting work and incurred an expenditure of Rs. 5,420 in 1928-29. This amount was made up of the expenses on account of salary, wages, legal expenses, depreciation, etc. It may be mentioned here that production was not resumed by the company. Till 1930-31 the company was assessed to income-tax by the Income Tax Officer of Bombay as it had its principal place of business at Bombay. In that year the principal place of business was changed to Madras and the duty of assessing the company to income-tax for 1930-31 fell to the Income Tax Officer in Madras. In 1928-29 the Bombay Income Tax Officer allowed the sum of Rs. 5,420 being the loss of the mica business at Nellore against the profits of the company's other business. When the assessment for the year 1930-31 was taken up, the Madras Income Tax Officer took action under Section 31 of the Income Tax Act and assessed the company for a total income of Rs. 18,932 disallowing the sum of Rs. 5,420 on the ground that the loss was of a capital nature and not loss incurred in the course of business as the company did not do any business in the year of account. This order was confirmed by the Assistant Commissioner.
3. On the previous occasion when this Court was moved under Section 66(3) of the Income Tax Act, a finding was called for on the point 'with what intention the assessee company incurred the expenses during the year of assessment'? The finding returned was that 'the company intended to resume the business of mica mining it conditions and prospects proved favourable and that the expenditure had been incurred with that intention'. After the receipt of this finding this Court directed the Commissioner to refer the point stated at the beginning of this judgment.
4. The question for decision is whether the assessee in the circumstances of the case may be said to have been carrying on the business of mica mining, during the year in question, for it is clear that the Joss to be allowable must result, from the carrying on of a business: (Section 10.) It is argued on behalf of the Commissioner that the mica mining business originally carried on by the company as one of its businesses came to an end in 1927, that it was not resumed at all, and that in the circumstances the expenses incurred with a view to resume the business must be considered to be loss of a capital nature incurred by the company and not a loss incurred in the course of business as the company had admittedly not done any business in 1928-29. In our opinion this argument cannot be accepted. According to its memorandum one of the objects of the company was to search for, win, work and get mica. When production was stopped by a cyclone, the company started prospecting to find out whether the business can be carried on and incurred the expenses in question, with a view to resume production. How can it then be said that the business had stopped? It is admitted that the old staff of the company doing the mica business was maintained by it on a reduced scale, the work of prospecting was done by that staff, and that the expenses were incurred ii trying to see whether the production can be resumed. It appears to us that the fact that there was some period of inactivity in the carrying on of the business does not really affect the question, nor is the question affected by the consideration that the business was not resumed after the expenses had been incurred. The case relied on, 6 I.T.C. 83, in the Commissioner's reference is not to the point, for hi that case, the company started a new business altogether.
5. Expenses incurred in connection with the re-starting of an old business as in the present case though it was not resumed afterwards, should be treated on a different footing. It is not necessary to discuss the various illustrative, cases brought to our notice as the decision whether the business was being carried on must depend in each case on its own facts and not on any general theory of law. Having regard to the circumstances of the present case we think the expenditure incurred by the company in 1923-29 was with respect to the carrying on of the mica business which it carrying on along with its other businesses and the amount is therefore allowable as a deduction against the profits and gains of the assessee's other business. We answer the question accordingly. The assessee will get Rs. 250 for his costs and he will also get a refund of the Rs. 100 deposited by him.
6. I agree.
7. I agree.