1963 PLP 413 (PTD)

INAMULLAH, J.‑This is a reference under section 66 (1) of the Income‑tax Act by the Income‑tax Appellate Tribunal. The Tribunal has referred the following two questions for our answer:‑-- (1) Whether there was any material or evidence on record in support of Tribunal's finding that the assessee (i.e. applicant) was not carrying on the same business in the two years in question (Income‑tax years 1952‑53 and 1953‑54)? (2) Whether in the circumstances of the case the interpre tation given by the Tribunal is correct for the term "same". The facts giving rise to these questions are quite simple. The assessee, Seth Ismail Jamal Budhani (hereinafter called the assessee) is an individual dealing in textile goods on a wholesale basis. He had 5/29th share in the business known as Haji Abdul Karim & Co. The business suffered a loss in the assess ment year 1952‑53 and the share of the assessee came to Rs. 73,

907. The calendar year for the assessment year 1952‑53 ended on 3ist December 1951. The assessee ceased to be a partner in the said firm from the 1st January 1952. In the assess ment year 1953‑54 the assessee held a share of 6 annas 6 ps. in the firm known as Ismail Jamal & Co. During the assessment year 1953‑54 Ismail Jamal & Co. earned some profits and the share of the assessee came to Rs. 44,

477. The Income‑tax Officer did not carry forward the loss suffered by the assessee in Haji Abdul Karim & Co. in the year 1952‑53 with the result that the profit earned by the assessee in the firm Ismail Jamal & Co. was subjected to tax without any set‑off for the loss incurred by the assessee in Haji Abdul Karim & Co. On appeal to the Appellate Assistant Commissioner the finding of the Income‑tax Officer was confirmed. The assessee went in appeal to the Tribunal. The Tribunal while dealing with the question whether the. assessee was entitled to a set‑off, for the loss that he had suffered, under section 24 (2) of the Income‑tax Act (hereinafter called the Act) observed as under :‑-- "The point involved in this case centres round the meaning of the word "same". We are of the opinion "same" here does not mean same category or line of business but it envisages a continuity of an organisation in the shape of business. The word "same" has also the connotation of "unchanged". The assessee though he was a partner in two firms in the two years and carrying on the business in same commodity he cannot be said to be carrying on the same business. He may have been carrying on trade in the same commodity but the business cannot be said to be the same in the two years. The sameness should not be qualitative or categoriwise but it is the same in the sense of continuity in time. We are of the opinion that the officers below were correct in not allowing carry forward of loss arising to the assessee in 1952‑53 assessment year and allowing a set‑off against his profits arising in 1953‑54."

2. Mr. Ali Athar, the learned Advocate for the assessee, contended that the Tribunal misdirected itself in coming to the conclusion that under section 24 (2) of the Act continuity of the business was essential for interpreting the term "same" occurring in the said provision of law. In order to appreciate the contention of the learned Advocate it would be useful to reproduce section 24 (2) of the Act as it stood before its amendment of Ordinance XXV of 1960. It reads as under; "24 (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 3ist day of March 1940, under the head "Profits and gains of business, profession or vocation" ; and the loss cannot be wholly set‑off under subsection (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 ; and 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." We would like to observe at the very outset that it is not possible to give any comprehensive definition of the "same business" occurring in section 24 (2) of the Act. It would depend upon the facts and circumstances of each case whether business is the same as of the previous year in which the assessee suffered a loss. It is not possible to lay down any test of universal appli cation in respect of the question which would largely depend upon its own facts ; it would vary from the peculiar facts and circumstances of each case. We would avoid therefore to lay down any rigid rule for the determination of the meaning of "the same business" occurring in section 24 (2) of the Act. We will confine ourselves to the facts of the present case. Before we come to the facts of the present case and determine whether the business of Seth Ismail Jamal Budhani is the same as that.pf Haji Abdul Karim & Co. it would be useful to mention some of the authorities which have interpreted as to what is meant by the same business. We would mention a few cases in this connection.

3. The well known case is Scales v. George Thompson & Co. Ltd. (13 T C 83). In that case the Company carried on the business of underwriting. It also had a fleet of steamers. The question was whether the two businesses were the same for the purposes of taxation. While considering the question as to when the business can be said to be the same Rowlett, J. observed as under :‑ "I think the real question is, was there any inter‑connection, any interlacing, any interdependence, any unity at all embracing those two businesses."

4. Manilal Dabyabhai v. Commissioner of Income‑tax (A I R 1960 Bom. 130). In that case a Hindu undivided family carried on the business in cloth in the name of Dayabbai Sobharam and also carried on business in speculation in gold, silver, cotton etc. in the same name. He maintained only one set of accounts in respect of the two businesses and the two businesses were carried on from the same shop. It was held in that case, in spite of the fact that the businesses were carried on in the same name and the account books were the Fame that the two businesses were quite separate. It was observed in that case that in determining the question whether the two businesses can be called the same business or not, consideration must be directed to the concordant activities, if any, and to the basic singleness, if any, of the two businesses. If the activities are diverse and distinct and there is no basic oneness in the nature of the two businesses then it cannot be said that they are the same business for the purpose of section 24 (2) of the Income‑tax Act.

5. Banka Mal Niranjandas v. Commissioner of Income‑tax, Punjab (20 I T R 536). In that case a Hindu undivided family was carrying on business in the name of Banka Mal Niranjan Das with its head office at Kaithal. It also owned some share in a firm. Banka Mal Laija Ram & Co. at Kaithal. The assessee suffered a loss in the former business. He set‑off the loss against the income of the business Banka Mal Lajja Ram & Co. The Income‑tax Authorities held that the assessee was not entitled to the benefit of section 24 (2) as the business of the two Companies was not the same. In that case a Division Bench of. the Lahore High Court consisting of Muhammad Munir, C. J and Kayani, J. observed as under :‑ "It cannot be contended that the business carried on by Banka Mal Lajja Ram & Co., of which the assessee, who is a Hindu undivided family, is merely one of the members, is the same business, which is being carried on under the name of Banka Mal Niranjan Das and in which the loss in question was suffered. In the statement of the case, there is nothing to show whether the nature of the business of Banka Mal Niranjan Das is different from that of the business of Banka Mal Lajja Ram & Co. but assuming that the character of both these businesses is the same, persons who own them are different. The two businesses cannot, therefore, be described as the same business."

6. Considering the various tests laid down by their Lord ships in the cases mentioned above we come to the conclusion that the business of Haji Abdul Karim & Co. cannot be said to be the business of the firm styled Haji Ismail Jamal & Co. In the first place if the business of Haji Abdul Karim & Co. had ceased to exist it would have no possible effect on the business of Haji Ismail Jamal & Co. It cannot, therefore, be said that the two businesses are the same. In the second place, the persons composing the two Companies are not the same. One Company may take to other businesses without affecting the business of the other. In short, these two businesses cannot be said to be interlaced or inter‑dependent.

7. Mr. Ali Athar has relied on the case of Sitaram Motiram Jain v. Commissioner of Income‑tax (1961 43 I T R 405) in support of his contention that the businesses of the two Companies were the same. In that case the assessee who was an individual was carrying on hardware business in the name and style of "Motiram Sitaram Jain" as sole proprietor for a number of years. After some time the assessee admitted his brother as a working partner with a 6 annas share in the profits of the business. The assessee had suffered a loss in the business individually carried on by him. He claimed a set‑off of the loss under section 24 (2) of the Income‑tax Act from the profit of his share of the partnership business. It was held that the assessee could do so as the business was the same. There is, on the facts stated in that case, no doubt that the business was the same. The business remained the same business of hardware, though the assessee had taken his brother also as a partner in the business. In the case before us the business of Haji Abdul Karim was not taken over by the Company known as Ismail Jamal & Co. The two remained as independent businesses.

8. For the reasons that we have given above, we would answer the two questions referred to us in the affirmative. The applicant to pay the costs of this reference to the respondent. Questions answered in affirmative.