Case: Standard Refinery &amp; Distillery Ltd Vs. Commissioner Of Income-Tax, Calcutta

1. This is an assessees appeal. The assessee is a public limited company and the appeal relates to the assessment for the assessment year, corresponding to the accounting year which is the calendar year ending on December 31, 1948. The assessee company was incorporated in 1942. At the beginning it owned a distillery at Unnao. It acquired a refinery in 1943. With effect from June 1, l945, the assessee company obtained on lease the New Sawan Sugar and Gur Refining Co. During the period from January 29, 1946 to April 23, 1946, the assessee company purchased 41,300 shares of the said company for Rs.. On April 30, 1947 the entire block of shares was sold to produce Exchange Corporation Ltd. for Rs.. The transaction resulted in a loss of Rs.. This loss was treated by the assessee as a trading loss for the assessment year. After setting off this loss against the other income of the assessee company, a loss of Rupees 2,27,085/was carried forward under S. 24 (2) of thex Act, 1922 (to be hereinafter referred to as the Act) to the year0 and later years. The assessee claimed to set off this unabsorbed loss pertaining to the share business against its profits in the sugar business for the assessment year. Thex Officer did not permit this set. TheAppellant Assistant Commissioner confirmed the order of thex Officer. In a further appeal, the Appellate Tribunal agreed with the conclusion reached by thex Officer.r at the instance of the High Court, the Appellate Tribunal stated a case under S. 66 (2) of the Act on the following question of law:"Was there any evidence before the Tribunal on which it could hold that the business in dealing with shares was distinct and separate from the business of sugar manufacturing and distillery?"2. By its judgment dated April 23, 1963*the High Court answered the question in the affirmative and against the assessee. This appeal has been brought against the decision of the High Court after obtaining a certificate under S.A (2) of the Actappeal came up for hearing before this Court on February 6, 1969. After hearing the Counsel for the parties this Court observed:"In the present case however it is not possible for us to satisfactorily dispose of this appeal because the statement of the case submitted by the Tribunal is incomplete and has omitted to state material facts bearing upon the question referred. For instance, it is not clear as to whether the assessee adduced any evidence as to why it started purchasing the shares of the lessor company about six months after the commencement of the lease. It is also not stated by the Tribunal whether there is any evidence of interrelation between the purchase of shares and the manufacture of sugar."4. In view of that conclusion this Court directed the Tribunal to submit a supplementary statement of case on some of the points formulated in the orderTribunal accordingly submitted a supplementary statement of case. Even after considering that supplementary statement, this Court*found itself unable to record its opinion on the question referred to. This Court was also of the opinion that the question which the Tribunal was directed to and did refer was defective and restricted the scope of the enquiry. It accordingly reframed the question as follows:"Whether the business of the company of dealing in shares and the business of manufacturing sugar and other commodities constitute the same business within the meaning of S. 24 (2) of the Indianx Act, 1922, in force in the year of assessment?"6. It further directed the attention of the Tribunal to the decision of this Court in Commr. ofx Madras v. Prithvi Insurance Co. Ltd. 63 ITR 632   = (AIR 1967 SC 816  ) in order to assist the Tribunal to find out the relevant points for consideration. In the order calling for a further supplementary statement, this Court observed:"As pointed out by this Court in Commr. of Income Tax, Madras v. Prithvi Ins. Co. Ltd. 63 ITR 632   = (AIR 1967 SC 816  ) in determining whether two lines of business constitute the "same business" within the meaning of S. 24 (2) of thex Act, thex authorities must consider thee and unity furnished by the existence of common management, common business organisation, common administration, common fund and a common place of business."Tribunal has now submitted the second supplementary statement of case called for by thisCourt.Thefacts found by it are as follows:e is a single trading and profit and loss account. In the same account the sales of spirit, sugar and molasses as well as stock and shares appear:e sharetransactions as well as the business has been dealt with by a common organisation, though the sale of shares is a single transaction and the purchase ofshares isalso more or less of the same character:e business of the companyas well as the transaction relating totheshares wereattended to as part and parcel ofthebusiness oftheassessee company;(4) A common fund was utilised both for business purposes as well as forthepurchase of shares. A part ofthet of Rs. 6,80,046/taken fromthebank on December 31, 1947 has been discharged from out oftheincome ofthebusiness ande sharetransaction work as well asther businessoftheassessee company were carried on inthesame place8. Fromthefacts found bytheTribunal, it is clear thatthesharetransaction as well asthee company weredealt with by a common management, common business organization, common administration, common fund and common placeof

Reasoning: interconnection and inter-lacing, inter-dependence and unity are not freeofambiguity. But this Court has laid down certain objective tests for finding outtheexistenceofinter-connection, inter-lacing, inter-dependence and unity between two or more businesses. In Commr,ofIncome-tax Madras v. Prithvi Insurance Co. Ltd. 63 ITR 632   = (AIR 19G7 SC 816)this Court ruled that inter-connection, inter-lacing, inter-dependence and unity were furnished bytheexistenceofcommon management, common business organisation, common administration, common fund and a common placeofbusiness. This conclusion was reiterated by this very bench in Produce Exchange Corporation Ltd. v. Commr.ofIncome-tax (Central Calcutta) (1970) 77 ITR 739 (SCI)assessee company carried on business as a dealer in diverse commodities and also stock and. Intheyearofaccount 1949, it had suffered lossofRupees 3,71,700/- inthesaleofs whichthecompany claimed to carry forward and setf againstthefrom transactions ine Tribunalfound thate was complete unityofcontrol ands wereofa numberofcommodities in whichthecompany dealt intheordinary courseofbusiness andthate was no elementofdiversity or distinction or separateness aboutthetransaction in, and accordingly upheldtheclaim. On a referencetheHigh Court heldthattheessential matter to be considered wasthenatureofthetwo linesofbusiness andnot merelyr unityofcontrol andthate Tribunalerred in holdingthatthewhole trading activity formed one business. ReversingthedecisionoftheHigh Court this Court ruledthat, decisive test was unityofcontrol andnotthenatureofthetwo lines8. Fromthefacts found by