1. This is a reference made at the instance of the Commissioner of Income-tax, West Bengal, under Section 66(1) of the Indian Income-tax Act in which the following question has been framed for the opinion of the Court:
'Whether in the fact and circumstances of this case and upon a proper construction of sub-section (2) of Section 24 of the Indian Income-tax Act, 1922, the loss of Rs. 21862/-out of the total loss in the silver account carried forward from the 1940-41 assessment can be adjusted against the profits of the money-lending business in the assessment year 1941-42?'
2. The assessee carried on business in silver, hessian, jute etc. and also had a money-lending business. The assessment year in question is the year 1941-42. The profit on the silver business was computed at Rs. 26801/- but in the jute hessian etc business there was a loss of Rs. 18228/-. The profits in these activities which are referred to as the speculation business for the assessment year was therefore Rs. 8573/-. The profit of the money-lending business during the assessment year was computed at Rs. 20087/-.
3. In the assessment year 1940-41 there was a loss in the silver business amounting to Rs. 30435/- which was carried forward to the 1941-42 assessment year. After deducting the profit of Rs. 8573/- in what was called the speculation business from the loss thus carried forward there was still a loss of Rs. 21862/-The assessee claimed that this loss of Rs. 21862/- should not be carried forward to the next year, but it should be adjusted against the profit of Rs. 20087/- in the money-lending business for the assessment year. The Income-tax officer and the Appellate Assistant Commissioner did not allow the claim for the reason that the business of speculating in silver, jute, hessian etc., was not the same business as the money-lending business. The Appellate Tribunal however took a different view and found in favour of the assessee holding that the set off claimed by the assessee was permissible.
4. The answer to the question depends upon the construction to be given to Section 24, Sub-sections (1) and (2) of the Indian Income-tax Act. The material portions of these subsections are as follows:
'24 (1) Where any assessee sustains a loss of profits or gains in any year under any of the heads mentioned in Section 6 he shall be entitled to have the amount of the loss set off against his income, profits or gains under any other head in that year.
* * * *2. 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 gains 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 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. * * * *
5. The Appellate Tribunal found as a fact as indeed the Appellate Assistant Commissioner had found that the speculation business as it was called that is the business in silver and the business in jute and hessian was distinct and separate from the money-lending business. It had been contended before the Tribunal that the account of these businesses were so interlaced and interwoven that they should be regarded as simply departments of one and the same business. But there is undoubtedly a clear finding in the appellate order of the Tribunal that these businesses were separate. In their appellate order the Tribunal observed;
'Mr. Kar appearing on behalf of the appellant wants us to find that the money-lending business and speculation business in jute silver etc. were the same inasmuch as they are interconnected and dovetailed and has relied on the decision of the Patna High Court in 'REKHABCHAND SAROJI v. COMMR. OF INCOME-TAX, B. & O. : 15ITR465(Patna) . We do not think that the facts of that case are similar to the facts of the present one and in the circumstances we are not inclined to hold that money-lending business and the speculation business were the same.'
This finding is reiterated in the case stated.
6. If the so-called speculation business and the money-lending business really formed one business then the question would present no difficulty whatsoever. But on the other hand if these two businesses are regarded as distinct and separate then the question arises whether the set off claimed by the assessee could be legitimately made under Section 24 (2) of the Indian Income-tax Act. That sub-section provides that where the assessee sustains a loss of profits or gains in any year and the loss cannot be wholly set off under the provisions of sub-section (1) of the section, the portion not so set off shall be carried forward to the following year and set off against the profits or gains if any of the assessee from the same business, profession or vocation.
7. Dr. Gupta on behalf of the Commissioner of Income-tax has contended that the loss incurred in the speculation business could not be set off against the profits of the money-lending business because the loss can only be set off against the profits in the following year of the same business. As the Tribunal has found that the speculation business and the money-lending business are separate no set ff is permissible. The loss in the speculation business could have been set off against the profits of the speculation business in the following year but it is contended that the loss in the speculation business cannot be set off against the profits of the money-lending business in the following year as those profits are profits of a different business altogether.
8. The view of the Tribunal was that a somewhat wide construction must be given to the phrase 'the same business' appearing in sub-section (2) of Section 24 of the Act. Their view can best be stated in their own language which appears in their order:
'Reading the section we do not think that there is any warrant for holding that the 'same business' profession or vocation relate to the business profession or vocation carried on by the assessee in the preceding year. The word 'same' means 'previously alluded to' or 'aforesaid'. What has been alluded to previously is under the head 'profits and gains' of business, profession and vocation. Therefore in our opinion the word 'same' would naturally mean profits and gains from business. To give the interpretation that the word 'same business profession or vocation' relate to the business profession or vocation carried on by the assessee in the preceding year would create practical difficulties also.'
9. Mr. Atul Gupta on behalf of the assessee has not contended that the reasons for the view of the Appellate Tribunal can be sustained but he has urged that the result which they have arrived at is right.
10. Mr. Gupta's argument is that the activities of the assessee must for the purposes of Section 24 (2) of the Indian Income-tax Act be regarded as a whole. For the purposes of assessment of income there was only one business and the income of the assessee would be assessed after applying the provisions of Section 24 (1) of the Act. Mr. Gupta has stated that the business of the assessee in 1940-41 was that of dealing in silver, hessian and jute etc., and money-lending. For the purposes of the Indian Income-tax Act these activities would have to be regarded as constituting one business. Each activity at most only amount as it were to a department of a larger business embracing the whole. The assessee undoubtedly carried on the same activities in the following year, namely, the assessment year 1941. 42. Therefore Mr. Gupta contends that he was carrying on the same business in each of these years and therefore the set off for the loss against the profit was admissible under subsection (2) of Section 24.
11. Mr. Gupta has contended that though in England it might be held that various activities of an assessee constituted distinct and separate businesses nevertheless in India such activities though possibly kept entirely separately for the purposes of book-keeping introduction of capital such like would have to be regarded as merely one business of the assessee.
12. As I have stated earlier the Tribunal found that the business of speculation and the money-lending business were two distinct and separate businesses and it appears to me that if that finding is accepted then the loss incurred in the speculation business in 1940-41 could not be set off against the profits of the money-lending business in 1941-42 because it would mean the setting off a loss in one business against the profit in the following year in another business.
13. It is difficult to hold that the words 'business, profession or vocation' appearing in this sub-section cover more than one business and more than one profession or vocation. Assume an assessee is carrying on the profession of an Accountant and a professional Musician and make a loss in his profession as an Accountant. If in the following year he was carrying on the same professions Mr. Gupta has to concede that his construction would mean that the assessee could set off the loss which he made in carrying on his profession as an Accountant in one year against his profits in the following year from his profession as a professional Musician, because according to Mr. Gupta the two professions - the profession of an Accountant and the profession of a professional Musician would for the purposes of the Indian Income-tax Act have to be regarded as one profession when obviously they are two distinct and separate professions. As these words 'the same business profession or vocation' appear in the sub-section in the singular it is difficult to apply them to cover more than one business or more than one profession or vocation.
14. It may well be that the construction placed upon this sub-section by the Tribunal may lead to unfairness but that is no reason why a very forced construction should be placed upon the words in question.
14a. The view taken by the Tribunal is in accordance with a number of decisions of other High Courts though there is no express decision of this Court on the matter. In 'INCOME TAX APPELLATE TRIBUNAL v. RAMKRISHNA RAMNATH an assessee carried on the business of manufacturing 'bidi' and a speculation business which were found to be separate businesses. The Bench held that under Section 24 (2) the assessee was not entitled to set off the loss in the speculation business carried forward by him from the assessment year 1939-40 to the assessment year 1940-41, against the profits and gains of the 'bidi' business of the latter year. The two businesses were found to be separate and therefore 3. 24 (2) of the Indian Income-tax Act was held not to permit of such a set off.
15. The same view was taken by the Madras High Court in 'S. N. AT. CT. CHIDAMBARAM CHETTIAR v. COMMR. OF INCOME TAX, MADRAS : 13ITR177(Bom) . In that case a Bench were of the opinion that two businesses carried on by the assessee were not separate but were merely parts of one business. However the Bench was clearly of the view that if it had been found that these two businesses were distinct and separate businesses, then the loss incurred in one business during one assessment year could not be set off against the profits made in the other business in the following assessment year under Section 24 (2) of the Act. Where an assessee carried on more than one business and such were separate the loss incurred in one business could only be set off in the folllowing year against profits of that business and not against the profits of another business carried on by the assessee.
16. A similar view was taken by the Bombay High Court in 'GOBINDRAM BROS. LTD. v. COMMR. OF INCOME TAX CENTRAL BOMBAY : 14ITR764(Bom) where again it was held that the two businesses were not separate. The Bench however was of the view that if they were the view expressed on behalf of the Commissioner in this case would have to be followed. A similar decision is that of the Patna High Court in 'REKHABCHAND SAROGI v. COMMR. OF INCOME-TAX, B. & O. : 15ITR465(Patna) .
17. It appears to me that this matter is covered by a body of authority and we are bound to hold that in this case the set off claimed by the assessee was rightly disallowed by the Income Tax Commissioner and the Assistant Appellate Commissioner and that the view of the Appellate Tribunal is erroneous.
18. We would therefore answer the question submitted in the negative.
19. The Commissioner is entitled to the costs of these proceedings. Certified for two Counsel.
20. I agree.