- Court
- Supreme Court of India
- Decided
- 17 November 1960
- Bench
- J. L. Kapur
- Result
- Court answered the question in the negative. On
Headnote
'960 business and trade organised with the object of Th• Ahmedabad di~covering w~ys and means _by which the member-Textile Industry's ~mlls m~y obtam large~ profits m connection with their
Research mdustrres. In these circumstances we have no hesi-Association tation in coming to the conclusion that the appellant-
v. . association is carrying on an activity which clearly The State 01 comes within the definition of the word "industry" in Bombay _ &- Others s. 2( J ') an d w h" ic h canno t b e ass1m1 . .1 ate d to a purely
wanchoo 1. educational institution. In this view of the matter,
when a dispute arose between the appellant and some of its employees, it was an industrial dispute and could be properly referred for adjudication under the Act.
The appeal fails and is hereby dismissed with <me set of costs.
Appeal dismissed.
SETABGUNJ SUGAR MILLS LTD.
v.
November r7. THE COMMISSIONER OF INCOME-TAX, CENTRAL, CALCUTTA. ii J. L. KAI'UR, M. HrnAYATUI,LAH and J.C. SHAH, JJ. Income Tax-Company having several activities-Set-off of loss in one, when can be claimed agait.sl profits in another-W he-ther activities constitute one business or separate businesses-Mixed question of law and fact-Indian Income Tax Act, r922, (II of r922) ss. 24(2), 66(2).
The appellant company which had different ventures claim-ed to set off against the profits of one venture the losses of its other venture which were brought forward from the back years, contending that the losses were of the same business and s. 24(2) of the Indian Income-tax Act applied. The tribunal rejected the appellants contention and gave reasons why the various activities of the company could not be construed as the same business for the application of s. 24(2).
The company then asked the Tribunal to make a reference to the High Court on questions of law arising out of Tribunal's order. The Tribunal declined to make a reference. The com-pany moved the High Court of Calcutta, under s. 66(2) of Income-tax Act, for calling upon the Tribunal to state a case but 1960 the application was summarily dismissed. The company appeal- . ed to the Supreme Court, by special leave, against the decision Setabfiun1 of the Income-tax Appellate Tribunal and also the order of the Sugar Mills Ltd. Calcutta High Court. v.
Hel d , t h at t h e quest10n · w h et h er d1tterent ventures carne · d The Commissioner on b y an · d' .1v1 'd ua l or a company f orm one b usmess · is · a m1xe · d oj 1 ncome-tax c
in 1 question of law and facts. The principle is to find out whether Centra • alrntta. there is any interconnection, any interlacing, any interdepen-dence, any unity at all, embracing the ventures as laid down in Scales v. George Thomp~on & Co. Ltd. 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 not one business. The ultimate conclusion is a legal infe-rence from facts proved and is one of mixed law and fact on which application of s. 24(2) of the Act depends.
In the instant case a question of law did arise on which the High Court should have asked for a statement of the case. The question of law is "whether on the facts and circumstances of the case, the business activities of the company, to wit, manu-facture and sale of sugar and sale and purchase of gunnies, jute, mustard seeds, constituted the same business within the meaning of s. 24(2) of the Indian Income-tax Act, 1922".
The High Court is directed to call for a statement of the case from the Tribunal and dispose of it according to law.
Scales v. 'George Thompson & Co. Ltd., (1927) 13 T. C. 83, relied on.
CIVIL APPELLATE Ju&Iso10TI0N: Civil Appeal No. 143 of 1958.
Appeal by Special Leave from the Judgment and Order dated the 15th March, 1955, of the Income-tax Appellate Tribunal of India, Calcutt.a in I. T. A.
No. 4309 of 1954.
Civil Appeal No. 144 of 1958.
Appeal by Special Leave from the Judgment and Order dated the 27th April, 1956, of the Calcutta High Court in Income-tax Matter No. 9 of 1956.
N. A. Palkhivala (In both the Appeals) and B. P.
Mahe,shwari for tlie Appellants.
K. N. Rajagopal Sastri a~1d D. Gupta for the Res-pondent.
1960. November 17. The Judgment of the Court was deliv~d by
I96o HrnAYATULLAH, J.-These are two consolidated b . appeals by special leave. The first is directed against Suga; 5 1 ~~~; 1 an order of the Income-tax Appellate Tribunal, Cal-
Lid.
v. cutta Bench dated March 15, 1955, and the other, Th• Commissioner against an order of the Calcutta High Court dated
of Income-lax. April 27, 1956, declining to ask for a statement of Central. Calcutta. the case under s. 66(2) of the Indian Income-tax Act.
-- The facts are as follows : Setabgunj Sugar Mills, Hidayatullah ]. Ltd., is the appellant. This Company was incorporat-
ed in 1934, and was established to take over some sugar mills run by a firm. Included in the objects for which the Company was established was the business of buyers, sellers and dealers in jute, gunnies, oil seeds, etc. ]'or the first few years, the Company · carried on the business of manufacture and sale of
sugar only. In the accounting year ending August 31, 1945, the Company had some transactions in gunnies and made a profit. In the next accounting year end-ing August 31, 1946, the Company made also a profit in transactions in gunnies and jute. In the account-ing year ending August 31, 1947, (corresponding assessment year being 1948-49), the Company did business in mustard seeds, gunnies and hessian and made profit. After this assessment year, the Company ceased to have any business other than the manufac-ture and sale of sugar.
We are concerned with the assessment year 1948-49, corresponding to the accounting year ending August 31, 1947. In that year, the profits from the sale of gunnies, mustard and jute amounted to Rs. 6,14,018. Some of the business was done by purchases or sales in the territory now in Pakistan. During the same accounting year, the sugar business resulted in a loss of Rs. 2,09,306. The loss in sugar business was set off against the profits of the other businesses, and the Income-tax Officer by his order assessed the Company on an income of Rs. 4,04,712. The Company claim-ed to set off against this profit, business losses of back years in its business in sugar amounting to Rs. 13,43,069, which had been brought forward from the previous year. The contention of the Company was that these losses were of the same business, and that s. 24(2) of the Indian Income-tax Act applied. r96o This contention was not accepted. On appeitl to the . Appellate Assistant Commissioner, the contention of suga:'a;J;~; 5 1 T.td. the Company was accepted. The Commissioner of In-v. come-tax then preferred an appeal before the Income-The Commissioner tax Appellate Tribunal (Calcutta Bench), which was of Income-tax, allowed. The Tribunal gave reasons why the various Central, Calcutta. activities of the Company could not be construed as the same business for the application of s. 24(2). Hidayatullah J.
The Company then asked the Tribunal to make a reference to the High Court on four questions of law which, it stated, arose out of the Tribunal's order.
The Tribunal declined to make a reference. The Company next moved the High Court under s. 66(2) of the Act for calling upon the Tribunal to state a ca.se on the four questions, but its application was summarily dismissed. The Company has now, with special leave, appealed against the order of the Tribu-nal reversing the decision of the Appellate Assistant Commissioner and also against the order of the High Court declining to call for a statement of the case.
The question whether, on the application of the settled tests, different ventures carried on by an indi-vidual or a company form the same business is a mixed question of law and, fact. Certain principles are applied to determine whether on the facts found a legal inference can be drawn that the different ven-tures constitute separate businesses or viewed to-gether, can be said to constitute the same business.
Headnote as published in the Digital Supreme Court Reports by the Supreme Court of India. Paragraph references point to the judgment below.
Judgment
These principles were stated by Rowlatt, J. in Scales v. George Thompson & Go. Ltd. (1). The learned Judge observed:
" ......... the real question is, was there any inter-connection, any interlacing, any inter-dependence, 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 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
(t) (1927) 13 T.C. 83, 89. .
r96o · separate businesses, and is not one business. No
. doubt, findings of fact are involved, because a variety S eta b gun} o f ma tt ers b earmg · on t h e umty · o f t h e b usmess . have Suga• Mills Ltd.
v. to be investigated, such as unity of control and The Commissioner management, conduct of the business through the
of Income-tax, same agency, the inter-relation of the businesses, the Cenfral, Calcutta. employment of same capital, the maintenance of com-Hidavatullah J. mon bo?ks of account, employment of same staff t~ run
· the busmess, the nature of the different transactwns,
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 s. 24(2) of the Act. In our opinion, a question of law did arise in the case, on which the High Court should have asked for a statement of the case. That question of law is:
"Whether on the facts and circumstances of the case, the business activities of the Company to wit, manufacture and sale of sugar and sale and purchase of gunnies, jute, mustard seeds constituted the same bustness within the meaning of s. 24(2) of the Indian Income-tax Act, 1922?"
We accordingly allow Civil Appeal No. 144 of 1958, with costs, and direct the High Court to call for a statement of the case from the Tribunal on this ques-tion, and dispose of it, according to law.
As regards Civil Appeal No. 143 of 1958, which questions the order of the Tribunal, we express no opinion, though we may state that the learned coun-sel for the Department attempted to show that the order of the Tribunal in the circumstances of the case was correct, and that no other decision but the one given by the Tribunal was possible. In view of the fact that the Appellate Assistant Commissioner had drawn an inference contrary to that of the Tribunal, it cannot be said that the legal inference was one and one alone. We, however, express no opinion either way, because we are satisfied that a question of law did arise in the case, and have, therefore, allowed the other appeal, so that the matter may be examined by the High Court in the first instance, on a statement of r96o the case by the Tribunal. b .
Civil Appeal No. 143 of 1958, will, therefore, be dis-5 1 ~1~~1; 1 Suga: Ltd. missed, but without any order as to costs. v. The Commissioner 0. A. No. 144 of 1958 allowed. of Income-tax, Central, Calrntta. O. A. No. 143 of 1958 dismissed.
H idayatullah ].
THE COMMISSIONER OF INCOME-TAX,
BOMBAY CITY, BOMBAY
November r7 • . v.
BIPINCHANDRA MAGANLAL AND CO. LTD.,
BOMBAY
S. K. DAS, M. HIDAYATULI,AH and J. C. SHAH, JJ.
Income-tax-Profit and assessable income-Diff crcnce between -Smallness of profit-How determined-Indian Income-tax Act, z922 (II of I9zz), ss. IO (z) (vii) second proviso, 66(I).
The respondent company purchased certain machinery for Rs. 89,000 and sold it for the same value, but in the books of account the written down value of the machinery was shown in the year of account as Rs. 73,392. The Income Tax Officer in computing the assessable income of the company added the difference, i.e. Rs. i5,608, between the actual value and the written down value to the profit of the company. The Income Tax Officer also passed an order under s. 23A of the Income Tax Act, and directed that the undistributed portion of the assess-able income, shall be deemed to have been distributed amongst the shareholders as dividend. Appeals against the order of the Income-tax Officer proved unsuccessful and the Appellate Tribu-nal referred the following question to the High Court under s. 66(1):-
"Whether the sum of Rs. I 5,608 should have been includ-ed in the assessee company's "profit" for the purpose of deter-mining whether the payment of a larger dividend than that declared by it would be unreasonable."
appeal by special leave,
Held, that the view takrn by the High Court was correct.
Source: Supreme Court of India, Digital Supreme Court Reports, via the Indian Supreme Court Judgments open dataset (CC BY 4.0). Text was extracted from the official PDF and may contain conversion errors. Check the official PDF before relying on it.