JUDGEMENT
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(1.)THIS is a Reference under sec. 66 (2) of the Indian Income Tax Act, 1922. The assessee is a public limited company. The assessment year is 1949-50, the corresponding accounting year being the calendar year ending on December 31, 1948. The assessee company was incorporated in 1942. It was then owning and working a Distillery in U. P. It acquired a Refinery in 1943. With effect from June 1, 1945 it obtained on lease, the sugar factory belonging to the New Savan Sugar and Gur Refining Co. Ltd. , and started manufacturing sugar. During the period between January 29, 1946, and April 23, 1946, the assessee purchased 41,300 shares of the New Savan Sugar and Gur Refining Company Ltd. , for Rs. 12,17,096/ -. On April 30, 1947 the entire block of 41,300 shares were sold to the Produce Exchange Corporation Ltd. for Rs. 8,46,750/- resulting in a loss, which was determined to be Rs. 3,70,356k This loss was accepted by the Appellate Tribunal as a trading loss. It fell to be considered in the immediately preceding year and after setting off the loss against the year's income, there remained a resultant loss of Rs. 2,27,085/ -. This loss was carried forward under sec. 24 (2 ).
(2.)THE unabsorbed loss of Rs. 2,27,085/-in the share transaction was claimed for set off against the profits of the assessee's business in the succeeding year. The Income Tax Officer refused to allow the loss. This view of the Income Tax Officer was also accepted by the Appellate Assistant Commissioner. The assessee's contentions were (1) that the purchase of shares of the aforesaid company was intimately connected with the lease of the sugar mill ; (2) that the business in the shares was carried on during the preceding accounting year by the same staff and with the same capital. Therefore, it was submitted that the share business was an inseparable part of and interconnected with the manufacture of liquor, sugar and molasses ; (3) that the capital with which the business in shares was carried on was supplied from the business of Refining Sugar; and (4) that the management of the two [businesses was also by the same staff. It was further argued that the Memorandum of Association of the applicant company authorised it to carry on the business of purchase and sale of shares. The Tribunal held that common ownership or common management of the businesses or the common staff and the same capital would not be the true test to find out whether they constitute the 'same business'. It further observed that what was required was interlacing, inter-dependant or dove-tailing or in other words, the essential condition to be satisfied was that the discontinuance of one business may affect the other, or the existence of one must depend upon the continuance of the other. The fact that the sugar mill was obtained on lease in 1945 and shares purchased in 1946, would not make the two businesses, according to the Tribunal, the "same business". The Tribunal has pointed out that the evidence on record does not show that the two businesses were inter-connected or were inextricably connected with each other to constitute the "same business" within the meaning of sub-sec. (2) of sec. 24 of the Indian Income Tax Act. The Tribunal, therefore, dismissed the assessee's claim.
(3.)ON the above facts and in the circumstances, the following question of law has been framed by this court. "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?" at a very outset it is necessary to set out the relevant
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