Case: L. M. Chhabda and Sons Vs. Commissioner of Income Tax, Gujarat

was not carried on in that year, the assessee can obviously not seek to debit the expenditure incurred for carrying on that business, against his other income, for the outgoings are chargeable only against the income of a business which was carried on in the previous year. It follows that if an assessee carries on several distinct and independent businesses, and one of such businesses is closed before the previous year, he cannot claim allowance under section 10 of the Act of an outgoing attributable to the business which is closed against the income of his other businesses in that year5. The only question which therefore fell to be determined is whether the business in respect of which the allowance is claimed was carried on in the year of account 1954. The appellants were carrying on business of exhibiting cinematograph films in Ahmedabad and Bombay. The appellants, contended that they were carrying on only one business of exhibiting cinematograph films, and in the course of that business they conducted three theatres in Ahmedabad and one in Bombay. The business of exhibiting films in the Prakash Talkies was according to the appellants a part of that business and was not an independent business, and the outgoing attributable to the business of Prakash Talkies was a permissible deduction in the computation of total taxable income of the appellants from the business of exhibiting cinematograph films carried on by them in the year of account. In support of that contention counsel submitted that where an assessee is carrying on business ventures of the same character at different places it must be held as a matter of law that the ventures are parts of a single business. In our view, no such broad proposition of law can be accepted. Whether different ventures carried on by an assessee form parts of the same business must depend on the facts and circumstances of each caseCounsel for the appellants then contended that in any event there was one business carried on by the appellants of exhibiting cinematograph films at different places. He contended that the question whether different ventures carried on by an individual or a company form the same business or different businesses is a mixed question of law and fact and not a pure question of fact. Counsel relied upon the judgment of this court in Setabganj Sugar Mills Ltd. v. Commissioner of Income-tax. It is true that the question whether different ventures and activities of business carried on by an individual constitute one business or different businesses is not a pure question of fact. As pointed out by this court in Setabganj Sugar Mills Ltd.s case in determining whether different ventures may be said to constitute the same business it has to be seen whether there was any interconnection, any interlacing, any interdependence, any unity embracing the ventures, and 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 different business ventures constitute one business. In the determination of the question, 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 inter-relation of the business, the employment of the 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.6. The Tribunal proceeded to found its conclusion substantially upon two principal facts. They observed that the cinema theatres acquired by the appellants from time to time on lease or otherwise were run independently of one another with " separate identifiable books " and that the opening of a new theatre or closure of another did not affect the working of the remaining theatres. Counsel for the appellants contended that in raising an inference that Prakash Talkies constituted an independent business, the Tribunal ignored certain other relevant facts. Counsel said that the books of account in respect of the business in different theatres were separately maintained, but the result of the accounts was incorporated in the head office at Ahmedabad, and that the Appellate Assistant Commissioner had held that the litigation expenses in connection with the dispute relating to mesne profits were properly allowable as expenditure against the business income of the appellantsIt is true that the appellants were conducting cinema theatres in Ahmedabad and Bombay, and the result of the accounts of the different ventures was entered in the accounts maintained at the head office, but from that circumstance no inference necessarily arises that the exhibition of films in different theatres constituted the same business. It was for the appellants to establish that different ventures constitute parts of the same business. There is in this case no evidence about unity of control and management, or inter-relation of the business, or employment of the same staff to run the business, or the possibility of one theatre being closed with out affecting the rest of the business. The Appellate Assistant Commissioner did, it appears, in the computation of taxable income allow certain litigation expenses in connection with the suit relating to the Prakash Talkies. But the Appellate Assistant Commissioner did not expressly find that the business of Prakash Talkies was part of a larger business carried on by the appellants, and no such inference may be raised by implication. From the fact that no appeal was filed by the revenue against the allowance of litigation expenses it does not follow that the department acquiesced in the contention of the appellants7. On the facts found by the Tribunal it is difficult to hold that the appellants have made out their case that the venture of Prakash Talkies was a part of a general business of exhibiting films in cinema theatres carried on by the appellants

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]For income of a business to be taxable under section 10 of the Act it is one of the conditions that the assessee must carry on the business in the relevant year of account. If the business is discontinued before the cornmencement of the accounting year, the income attributable to that business received in the year cannot be taxed under section 10, because the source of income had ceased to exist. If the income of a business is not taxable under section 10 as income of a particular year because the business was not carried on in that year, the assessee can obviously not seek to debit the expenditure incurred for carrying on that business, against his other income, for the outgoings are chargeable only against the income of a business which was carried on in the previous year. It follows that if an assessee carries on several distinct and independent businesses, and one of such businesses is closed before the previous year, he cannot claim allowance under section 10 of the Act of an outgoing attributable to the business which is closed against the income of his other businesses in thatour view, no such broad proposition of law can be accepted. Whether different ventures carried on by an assessee form parts of the same business must depend on the facts and circumstances of eachfor the appellants then contended that in any event there was one business carried on by the appellants of exhibiting cinematograph films at different places. He contended that the question whether different ventures carried on by an individual or a company form the same business or different businesses is a mixed question of law and fact and not a pure question of fact. Counsel relied upon the judgment of this court in Setabganj Sugar Mills Ltd. v. Commissioner ofIt is true that the question whether different ventures and activities of business carried on by an individual constitute one business or different businesses is not a pure question of fact. As pointed out by this court in Setabganj Sugar Mills Ltd.s case in determining whether different ventures may be said to constitute the same business it has to be seen whether there was any interconnection, any interlacing, any interdependence, any unity embracing the ventures, and 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 different business ventures constitute one business. In the determination of the question, 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, theof the business, the employment of the 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 sois true that the appellants were conducting cinema theatres in Ahmedabad and Bombay, and the result of the accounts of the different ventures was entered in the accounts maintained at the head office, but from that circumstance no inference necessarily arises that the exhibition of films in different theatres constituted the same business. It was for the appellants to establish that different ventures constitute parts of the same business. There is in this case no evidence about unity of control and management, orof the business, or employment of the same staff to run the business, or the possibility of one theatre being closed with out affecting the rest of the business. The Appellate Assistant Commissioner did, it appears, in the computation of taxable income allow certain litigation expenses in connection with the suit relating to the Prakash Talkies. But the Appellate Assistant Commissioner did not expressly find that the business of Prakash Talkies was part of a larger business carried on by the appellants, and no such inference may be raised by implication. From the fact that no appeal was filed by the revenue against the allowance of litigation expenses it does not follow that the department acquiesced in the contention of the appellants7. On the facts found by the Tribunal it is difficult to hold that the appellants have made out their case that the venture of Prakash Talkies was a part of a general business of exhibiting films in cinema theatres carried on by the appellants