MANCHANDA, J. - (1.) THIS and the connected references arise out of statements of the case submitted to this court by the Income-tax Appellate Tribunal, Allahabad Bench. The questions that have been formulated by the Tribunal in this reference are : 1. Whether on the facts of the case, the loss of Rs. 21,881 in Tata deferred shares is an admissible deduction in the determination of the net income, profits and gains from business under section 10 of the Income-tax Act ? Whether, on the facts and in the circumstances of the case, dealings in shares, cotton waste and money-lending constitute the same business within the meaning of section 24(2) of the Income-tax Act ?
(2.) THE question formulated by the Tribunal in each of the connected references is : Whether, on the facts and in the circumstances of the case, dealings in cloth, shares, brokerage and money-lending constituted the same business within the meaning of section 24(2) of the Income-tax Act ? This question is practically the same as question No. 2 formulated in this reference. THE assessee is the same in all the three references, it being a private limited company deriving income from business in shares, brokerage, money-lending, dividends, business in cloth and business in cotton waste. THE instant reference relates to the assessment year 1953-54 and the connected references relate to the assessment years 1950-51 and 1952-53. THE assessment for the assessment year 1951-52 is not in dispute. THE income derived or the loss suffered by the assessee in the assessment years 1948-49 to 1952-53 from various heads of income will appear from the following statement : JUDGEMENT_640_ITR59_1966Html1.htm It will be noticed that in the assessment years 1948-49, 1951-52 and subsequently the assessee did not do any business in cloth and any business in cotton waste in the assessment years 1948-49 up to 1951-52. In the assessment year 1948-49 it suffered a loss of Rs. 96,793.00, in 1949-50 a loss of Rs. 58,069.00 and in 1951-52 a loss of Rs. 1,126.00; it made a profit in the other assessment years. In the assessment year 1953-54 it also carried on a business in speculation by purchasing and selling deferred shares of a certain company; it did not take and did not give delivery of the shares. It suffered a loss of Rs. 21,881.00 in the transaction. The assessee claimed the right to deduct the above-mentioned losses suffered by it from the profits of the assessment years in question and it is this claim that has given rise to the questions submitted to this court for its opinion. In respect of the loss of Rs. 21,881 in speculative business, the Tribunal, following the decisions in Keshavlal Premchand v. Commissioner of Income-tax and Commissioner of Income-tax v. Ramgopal Kaniyalal, held that it could not be set off against the profits from other heads of income. As to whether the loss of Rs. 96,793, Rs. 58,669 and Rs. 1,126 in the assessment years 1948-49, 1949-50 and 1951-52 in the share business could be carried forward and set off against the income from cloth and waste cotton business was answered in the negative by the Tribunal, upon a consideration of various factors, and it was held that this could not be done as the two business, i.e., the share and jobbering business, were not the same business as cloth and cotton waste. Upon a reference being asked, the aforesaid two questions have been referred to this court. The first questions now stands concluded by a Division Bench decision of this court in Jagannath Mahadeo Prasad v. Commissioner of Income-tax (Income-tax Reference No. 130 of 1960 decided on April 14, 1964), where it was held that the loss from speculative dealings can be set off against the profits from other business for the purpose of computing the profits and gains under section 10(1) of the Act and that, for the purpose of computing the profits and gains from business under section 10, the proviso to section 24(1) has no application. In this view of the matter, question No. 1 is answered in the affirmative and in favour of the assessee.
(3.) THE answer to the second question will depend solely on whether the finding of the Tribunal that the dealing in shares and the dealing in cotton waste and money-lending do not constitute the same business is supported by material on the record and the legal inference drawn could have been drawn. The case before the Tribunal proceeded on the ground that section 24(2) as it stood before its amendment in 1955 was applicable to these proceedings. In other words the essential condition for the application of section 24(2) was that the business in which the loss was incurred and which loss required to be carried forward and set off against the profits of business should be the same business. The Tribunal, therefore, rightly considered this question, bearing in mind the principles which were laid down by Rowlatt J. in Scales v. George Thompson & Co. and have since been followed by courts not only in England but also in India. The Tribunal found : (1) That the main business of the assessee was that of a dealer in shares. (2) That the business in cotton or waste could not in any sense be said to be the same as the main business in share dealing. (3) That the cotton or waste business could not even be said to be ancillary to the main business. (4) That the two businesses could be easily separated and discontinued without in any way affecting the other. ;