Chakravartti, J. - (1.) This is a reference under Section 66(1) of the Indian Income Tax Act at the instance of the Commissioner of Income Tax, West Bengal, on a question of law relating to a claim made by the assessee for a set off of its loss, carried forward from the previous year, against the profits and gains of the year of account. It appears that the reference came up for hearing on a previous occasion, but the Bench dealing with it felt that the statement of case submitted by the Tribunal was not adequate. Accordingly, it directed the Tribunal to submit a further statement which has since been done. In making the order of remand, however, the High Court dealt with the basis of law upon which the Tribunal had decided the question and pronounced it to be wrong.
(2.) The assessee is a public limited company and is authorised by its Memorandum of Association to engage in diverse types of business. Among the business activities so authorised, it is necessary to mention, for the purposes of this case, only manufacture and sale of celluloid articles, Managing Agency, Commission, Share transactions and what is described as "joint ventures". Although the Company was authorised by the Memorandum of Association to undertake and carry on various lines of business, in actual fact it did only celluloid business upto the year 1944. In that year, the celluloid business was closed down and it appears that the Company switched over to other lines of business, such as Managing Agency, Commission, share dealings and joint ventures. In the accounting year 1944-45, when the Company was carrying on the celluloid business, it suffered some loss in business, the amount of which, however, has not been stated. It was this loss which the Company carried forward and wanted to set off against the profits derived from the new lines of business in the accounting year 1945-46. I have already stated that in the year of account 1944-45 when the loss was sustained, the Company was carrying on only the business of manufacture and sale of celluloid articles and no other business; in the year 1945-46, against the profits of which that loss was sought to be set off, the Company was no longer carrying on celluloid business but was carrying on other types of business which I have already mentioned.
(3.) On those facts it was held by the Income-tax officer and the Appellate Assistant Commissioner that the Company was not entitled to set off its loss of the previous year against the profits of the year. 1945-46, because the profits riad not been derived from the same business, as required by Section 24(2) of the Income-tax Act. Before the Tribunal, it appears to have been contended that it was not necessary under Section 24(2) that the profits, against which the loss carried forward from the previous year could be set off, must be the profits derived from the same business. That contention was accepted by the Tribunal and the assessee Company was allowed the set off claimed. Thereupon the Commissioner of Income-tax asked for and obtained a reference to this Court on the following question of law : "Whether in the facts and circumstances of the case and upon a proper construction of Sub-section (2) of Section 24 of the Indian Income-tax Act, 1922, the loss in the celluloid business in the assessment year 1945-46 can be carried forward and set off against the profits of the other businesses in the assessment year 1946-47 when the Assessee ceased to carry on the celluloid business during the assessment year 1946-47." It will be seen that the question presupposes that the loss which had been sustained in the accounting year 1944-45 was the loss suffered in the celluloid business, whereas the profits of the year 1945-46 against which the loss was sought to be set off were profits derived from "other business". In other words, the question presupposes that the business in which the loss was sustained and the business against the profit of which that loss was sought to be set off were not the same business.;