B. R. LTD. versus V. P. GUPTA, C.I.T., BOMBAY

Citation: [1978] 3 S.C.R. 877 · Decided: 03-05-1978 · Supreme Court of India · Bench: Y.V. CHANDRACHUD · Disposal: Appeal(s) allowed

Judgment (excerpt)

B. R. LTD. 
v. 
V. P. GUPTA, C.I.T., BOMBAY 
May 3, 1978 
[Y. V. CHANDRACHUD, CJ. AND V. D. TULZAPURKAR, J.J 
877 
lflco1ne Tax Act, 1922, S. 24(2) as it stood prior to its amendnient by the 
Finance Act, 1955-Interpretation of the expression "same business" occurring 
in S. 24(2)-Decisive tests to show the "same business" for the purpose of "set 
"' 
ofl" of loss in previous year. 
The appellant used to carry on business in (i) general insurance (ii) broker· 
A 
B 
age and commission and (iii) import and sale of woollen fabrics, leather beltings 9 
C 
hardware, toilet goods, chemicals and cotton fabrics etc. The business of import 
and sale was closed by the appellant towards the end of the calendar year 1952, 
corresponding to the assessment year 1953-54. In that year, the appellant suffered 
an accumulated business loss of Rs. 56,488/-. From the assessment year 1954-55 
i.e. from the commencement of the calendar year 1953, the appellant started ex-
porting textiles instead of importing woollen fabrics. The appellant claimed that 
the loss of Rs. 56,488/- incurred by it on the import and sale of articles should 
be set off against the ?rofits made by it during the assessment years 1954-55, 
D 
1955·56 and 1956-57. The Income Tax Officer and the Appellant Assistant Com-
missioner rejected the claim on the ground that the business of importing and 
selling goods was distinct and separate from the business of exporting goods; that 
the import and export business did not constitute the "same business"; and that 
as the import business was discontinued and did not exist in the assessment years 
1954-57 the unabsorbed loss could not be set off against the profits in the export 
business. The revision applications filed before the Co1nmissioner were rejected. 
Allowing the appeals by special leave the Court 
HELD•: I. Under Section 24(2) of the Income Tax Act, 
1922, an un-
absorbed loss could be+ carried forward to be set off against the profits of a 
subsequent year or years, only if such profits accrued to the assessee from the 
same business and not otherwise. In law, the two words "same" and "similar" 
connote different concepts and, therefore, the carrying on of a similar business 
will not meet the requirements of the section. The business has to be the same 
as before. But though this is so, it is not possible to evolve a satisfactory test 
of universal application for determining 
whether~ the business 
which 
an 
assessee carries on in a year in which he has maae profits against which a 
carried forward loss could be set off is the same business which he was cany-
ing on in the yea{ in which he incurred the loss. The determination of the 
question whether an assessee is carrying on in two different accounting periods 
the same business depends essentially on the facts of each 
particular case, 
though the decision whether an assessee is carrying on the same business is a 
mixed question of law and fact [881 H, 882 A-DJ 
Satabganj Sugar Mills Ltd. v. Commissioner of Income Tax, Central, Calcutta, 
41 I.T.R. 272; followed. 
2. The objective tests or the "fairly adequate tests" as laid down by the deci-
sions of Courts, for determining whether the two businesses constituted the 
"same business" within the meaning of S. 12B(1) of the Act, 1922 are :-
(i) Whether there is any inter-connection, any "inter-lacing, inter-depen-
dency, any unity at all embracing the two businesses of the assessee. 
(ii) 'Whether there is in-existence a common management, common fund 
and a common place of business. 
E 
F 
G 
H 
A 
B 
c 
D 
E 
F 
G 
H 
878 
SUPREME COURT REPORTS 
[1978] 3 S.C.R. 
(iii) Complete unity of control and not the nature of the two lines or 
business should be the deciding factor and; 
(iv) Non existence of any element of diversity or distinction or separate-
ness in regard to both the businesses. 
[&82 G, 883 G-H, 884 Fl 
Scales v. George Thompson & Co. 13 Tax Cases 83; Conunissioner vf Income 
Tax, Madras v. Prithivi Ins. Co. Ltd., 63 l.T.R., 632; Hooghly Trust (P) Ltd. v. 
Commissioner of Income Tax, West Bengal, 73 I.T.R. 685; Produce Exchange 
Corporation Ltd., v. Commissioner of lncon1e Tax (Central) Calcutta 77 l.T.R. 
73; Standard Refinery and Distillerv Ltd. v. Commissioner of Incon1e Tax (Cen-
tral), Calcutta, 79 l.T.R. 589; foliowed. 
3. In the instant case : 
(a) The Commissioner was wrong in taking the view that the business 
which the appellant was doing in the relevant assessment years was 
not the

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