P L D 1969 Dacca 687 (PLP)

A. S. CHOWDHURY, J.‑The Income‑tax Appellate Tribunal, Dacca Bench, Dacca has at the instance of the Commissioner of Income‑tax, Dacca Zone, Dacca made the following reference under subsection (1) of section 66 of the Income‑tax Act (hereinafter called `the Act') "Whether on the facts and in the circumstances of the case, the Tribunal was correct in holding that the Insurance Agency business and jute business of the assessee are one and the same business within the meaning of section 24(2) of the Income‑tax Act and that the loss in jute business should be set off under section 24(2) against the net income from Insurance Agency 7" The facts relevant for determination of the question are as follows: The assessee is a private limited company which deals in jute since July 195J. It was necessary for the assessee to insure its jute and instead of having the insurance done through some other agent, the company itself became an agent of an insurance company called, Queensland Insurance Company, and insured the jute business of the assessee‑company itself and it did not insure the jute of any other firm or any one else. While computing the income for the assessment of 1959‑60, it claimed that the income earned by it on account of its insurance agency should be set off against the loss carried forward from the previous year. The Income‑tax Officer did not accept the assessee's contention that it was entitled to claim set‑off. It, therefore, determined the profit from jute business at Rs. 19,25,978 and net income from the insurance agency business at Rs. 57,213 and it claimed set off the loss of Rs. 39,40,083 carried forward from the proceeding year against the income of Rs. 19,25,978 from the jute business and the balance of Rs. 20,14,105 was ordered to be carried forward to the following year. As a result of this order the assessee had to pay tax of Rs. 31,467 on account of an income of Rs. 57,213 carried from the insurance business. The assessee was dissatisfied as the Income‑tax Officer did not allow the set‑off as claimed by it. It, therefore, preferred an appeal before the Appellate Assistant Commissioner who accepted its contention and held that the insurance agency undertaken by the assessee was only for the furtherance of its own jute business. It was, therefore, according to him, the same business within the meaning of section 24(2) of the Act. On further appeal the Tribunal upheld the order of the Assistant Commissioner. Thereafter, at the instance of the assessee (?), the question set out at the outset has been referred to this Court for its opinion. The Appellate Assistant Commissioner while disposing of the appeal recorded the following important finding of facts "The insurance activities primarily concerned itself with jute stocks and the jute godowns of the appellant and that it had no similar relationship or alliance with other organisations. There is also ample evidence in the accounts themselves that the insurance transactions were entirely dependent on the size and volume of the jute business and appellant's commitment to the foreign buyers." The Tribunal also reached the conclusion in the following terms in its order, dated 20‑12‑1966 "We entirely agree with the Appellate Assistant Commissioner that the assessee took out the agency of the Insurance not with the motive of making any profit by transacting insurance business on behalf of others, but with the sole motive of facilitating the working of its own jute trade. The Departmental Representative had to admit that the assessee strictly confined its Insurance activity to insuring its own business case directly with the Insurance Company concerned and thereby reducing the burden of Insurance premiums paid by getting rebate or commission, as per Insurance Rules, on its own premiums." These findings of fact would, therefore, clearly indicate that the assessee in order to reduce the expenses of its jute business resorted to insuring its own jute as an agent of the Insurance Company in furtherance of its own jute business. On these findings of fact, the Tribunal held that the assessee was entitled to claim set‑off under section 24(2) of the Act as the agency came within the expression "same business" occurring in section 24(2). Section 24(2) is as follows: ' "(2) Where any assessee sustains a loss of profits or gains in any year, being a previous year not earlier then 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 subsection (1), so much of the loss as is not so set off, or the whole of the loss where the assessee has no income under any other head, shall be carried forward . . . . . . . ." In the case of Messrs Govindram Bros. Ltd. v. Commissioner of Income‑tax Central, Bombay ((1946) 14 I T R 764), Chagla, J. observed: "There can be no question that whether a certain business is or " is not the same business within the meaning of section 24 of subsection (2) of the Act is a question of fact and it is for the Tribunal to find that fact." In the case of K. S. S. Soundrapandia Nadar & Brothers v. Commissioner of Income‑tax, Madras ((1950) I T R 163), it was held by a Division Bench of the Madras High Court that the dealing in forward contracts carried on by the assessee in the Rangoon grain market was a part of general business of the assessee as dealers in rice and grain and they were therefore entitled to set off the loss against the profits of the year 1941‑42 under section 24(2) of the Act. It was further observed in that case that the question whether two lines of business carried on by a person constitute the same business or not is essentially a question of fact. If, however, there is no evidence to support the finding or a proper inference from the proved facts is not drawn, then it would be a question of law. In that case the learned Judge observed "It is not easy to formulate a test applicable to all cases in order to determine whether two dealings in different commodities or the carrying on different lines of business would constitute the same business or not within the meaning of section 24(2) of the Act. One thing, however, seems to be definite and that is that common ownership alone would not constitute different line of business the same business ; nor the mere fact that two businesses are of a distinct nature would make them separate business. An individual may run multiple stores like the Spencer & Co., at Madras, and yet the business may be only one business, though there are different line. In the case of Insurance Companies investments of their funds for the purpose of earning income is an ordinary incident of the business of Insurance, and though Insurance business and money‑lending are two different lines of business, yet the business is treated as one and entire." In the case before us it will be seen that the assessee has not insured the jute or any other goods of any one else it has merely insured its own jute. The agency has been undertaken by the same Management and it is being carried on clearly for the. purpose of its own jute business. Mr. Afzalul Hoque, learned Advocate for the Revenue, has strenuously urged before us that the business of the assessee in jute is separate and distinct from its agency of Queensland Insurance Company and, in support of his contention learned Advocate further submits that it is true that the assessee has not insured the goods of any other person but it would be open to it to undertake such business at any time it intended to do so. We make it plain that on the facts found by the Tribunal we are satisfied that the Insurance agency clearly comes within the meaning of the expression "same business" occurring in subsection (2) of section

24. If, however, the assessee undertakes, as suggested by learned Advocate for the Commissioner, insurance of goods of other persons the character of the agency in that case would definitely change and it would in that case be separate and distinct business. But on the facts found by the Tribunal, we find no reason whatsoever to interfere with the conclusion reached by it. This question also came up for discussion in the case of Commissioner of Income‑tax, Andhra Pradesh, Hyderabad v. The Cocanada Radhaswami Bank Ltd., Kakinada (A I R 1966 S C 47). In that case the Supreme Court of India observed as follows: "The Act provides for the setting off loss against profits in four ways. To illustrate, take the head `profits and gains of business, profession or vocation.' An assessee may have two businesses. In ascertaining the income in each of the two businesses he is entitled to deduct the losses incurred in respect of each of the said businesses. So calculated, if he has loss in one business and profit in the other, both falling under the same head, he can set off the loss in one against the profits of the other in arriving at the income under that head. Even so, he may still sustain loss under the same head. He can then set off the loss under the head `Business' against profits under another head, say `income from investments', even if investments are not part of the trading asset of the business. Notwithstand ing this process he may still incur loss in his business. Section 24(2) says that in that event he can carry forward the loss to the subsequent year or years and set off the said loss against the profit in the business. Be it noted that clause (2) of section 24, in contradistinction to clause .(1) thereof, is concerned only with the business and not with its head under section 6 of the Act. Section 24, therefore, is enacted to give further relief to an assessee carrying on a business and incurring loss in the business though the income therefrom falls under different heads under section 6 of the Act." The principle laid down above supports the conclusion reached by us in this behalf. Mr. Afzalul Haque, however, relied on the case of Seth Ismail Jamal Bhudani v. Commissioner of Income‑tax, Karachi (P L D 1963 Kar. 499). The facts of that case are easily distinguishable. In that case it was held that the assessee who ceased to be a partner in a firm which suffered a loss in the assessment year was not entitled to set off his share of loss against the share of profit from another firm composed of different partners in a different assessment year. In that case the learned Judges rightly found that there was neither any connection nor inter‑dependence between the two. In the case before us, it will be seen that the agency business was carried on only for the purpose of furtherance of the assessee's jute business. This is what Rowlatt, J. called inter‑dependence in the case of Scales v. George Thompson & Company Ltd. (13 Tax Cas. 83). In that case learned Judge observed "The real question is, was there any inter‑connection, any interlacing, any inter‑dependence, any unity at all embracing these two businesses." The learned Advocate for the Revenue also refers to a case of Haji Abdul Quayyum v. The Commissioner of Income‑tax (P L D 1963 Kar. 496). In that case the assessee carried on two businesses one for textile goods and other in a Tea Polishing Factory at a different place. It is clear from the nature of the two businesses that they are distinct and separate and has not inter‑dependence between the two and as such this case is also clearly distinguishable. We are clearly of opinion that in the facts and circumstances of the case there was definitely inter‑connection and inter dependence between the insurance agency and the jute business. For the reasons stated above, we answer the question in the affirmative and leave the parties to bear their own costs. A. H. KHAN, J.‑I agree. S. Q. Question answered in the affirmative.