Masud, J. - (1.) The facts under which this reference under Section 66 (1) of the Income-tax Act, 1922 arises may be briefly stated as follows : The assessee company had its mines known by the name Mundulpoor Coal Co., Ltd. In Ranigunj Coal Fields In Bihar. This business was closed down on March 10, 1957 which falls within the accounting year relevant to the assessment year 1957-58. The accounting period ended on March 31, 1957, During the relevant assessment year the assessee suffered a loss of Rs. 1,72,463/- from this mine. On March 14, 1957 the assessee took up a contract for raising coal from the colliery belonging to Central India Coal Fields Ltd. known as Khas Badjans Collieries. The said loss amounting to Rs. 1,72,463/ was sought to be carried forward for the purpose of deduction against future profits of the assessee's other venture under Section 24(2) of the Act. The Income-tax Officer refused to carry forward the said loss on the ground that the loss suffered by the assessee had arisen out of a business which had been abandoned. On appeal the Appellate Assessment Commissioner confirmed the order of the Income-tax Officer by adding a further ground that the subsequent undertaking of coal raising contract although of allied nature could not be treated as continuation of the assessee's previous business, namely, coal mining at Mundulpoor. The assessee appealed against the said order to the Appellate Tribunal but the said appeal was dismissed. On these facts, the question of law that arises is as follows: "Whether in the facts and circumstances of the case the two activities of the appellant company, i.e., the raising of coal from its coal mines and that from the mines belonging to other company constituted the same business or different business for that purpose of carry forward and set-off of losses determined for the assessment year 1957-58 under Section 24(2) of the Income-tax Act, 1922?"
(2.) Dr. D. 'Pal, learned counsel for the assesses, has submitted that the losses suffered by the assessee in its coal mining business should have been set off against the assessee's business under the contract of coal raising from the colliery belonging to Central India Coal Fields Ltd. According to him, the coal mining business of the assessee and the contract business were different activities of the assessee's same business and they could not be called distinct from one another. Under the Memorandum of Association of the assessee company, he added, it was competent for the assessee company to hold collieries as proprietors and also to do mining business which would include raising of coal on contracts. He further submitted that the same labour and staff which were running the Mundulpoor Mining business were diverted to the contract business of coal raisings from the colliery belonging to Central India Coal Fields Ltd. and, as such, the control and the structure of profit making in so far as the assessee was concerned were inter-dependent between the two businesses.
(3.) The short point to be decided In this case is whether the assessee's business under the contract of coal raising could be described as continuation of the assessee's coal mining business at Mundulpoor within the meaning of Section 24 (2) of the Act. The relevant provisions of Section 24 (2) read as follows :- "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 31st day of March, 1940 in business, profession or vocation and the loss cannot be wholly set off under Sub-section (1) so much of the loss as Is not so set off or the whole loss where the assessee had no other head of Income shall be carried forward to the following year, and (i) where the loss was sustained by him In a business consisting of speculative transactions, it shall be set off only against the profits and gains, if any, of any business in speculative transactions carried on by him in that year; (ii) where the loss was sustained by him in any other business, profession or vocation, it shall be set off against the profits and gains, if any, of any business, profession or vocation carried on by him in that year; provided that the business, profession or vocation in which the loss was originally sustained continued to be carried on by him in that year; (iii) if the loss in either case 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.............. ..........";