BROOKE BOND & COMPANY LTD. (NOW KNOWN AS BROOKE BOND LEIBIG LIMITED) versus C.I.T. WEST BENGAL-II, CALCUTTA

Citation: [1986] 3 S.C.R. 980 · Decided: 30-09-1986 · Supreme Court of India · Bench: R.S. PATHAK · Disposal: Case Partly allowed

Judgment (excerpt)

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B 
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BROOKE BOND & COMPANYLTO. (NOW KNOWN AS 
BROOKE BOND LEIBIG LIMITED) 
v. 
C.I.T., WEST BENGAL-II, CALCUTTA 
SEPTEMBER 30, 1986 
[RS. PATHAK AND SABYASACHI MUKHARJI, JJ.] 
Indian Income Tax Act, 1922--Sections 6, 24(2) & 33A-Asses-
see-Dividend income shown in return under head 'income from other 
sources'-Whether could be computed under head 'income from· 
,business'. 
The appellant, a sterling company carrying on business in tea 
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with its Head Office in the United Kingdom, invested in the shares of 
other tea companies in different parts of the world, and had a hundred 
per cent share holding in an Indian subsidiary. 
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The appellant was assessed under the Indian Income Tax Act 
1922. For the assessment year I955-56 the appellant was assessed on its 
total world income on the basis of provisional figures of its business loss 
including depreciation, and its income from individuals. As its Indian 
income exceeded its income outside India it was assessed as a resident. 
Meanwhile the appellant had already been assessed for the subsequent 
assessment year 1956-57 in the status of a 'non-resident' and its income 
from dividends was assessed under the head 'Income from Other 
Sources'. The loss determined for the assessment year 1955-56 could 
not be carried forward and set off against the income for the assessment 
year 1956-57, as the latter assessment was made subsequent to the 
former. 
The appellant preferred two revision applications, one each for 
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the assessment years 1955-56 and 1956-57 under sub-s. (2) of s. 33A. In 
the revision application for the assessment year 1955-56, the appellant 
claimed that the quantum of loss determined for that year having been 
based on provisional figures should be revised on the basis of final 
figures certified by an Inspector of Taxes in the United Kingdom, that 
the loss should be ascertained for the purpose of carrying it forward, 
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and that the loss should be bifurcated between an unabsorbed depreda-
980 
BROOKE BOND & CO. v. C.I.T. 
981 
lion and other loss. In the revision application ·for the assessment year 
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1956-57, the appellant claimed a set off of the loss determined for the 
assessment year 1955-56 against the income of the assessment year 
1956-57 on the gronnd that the shares held by it in different companies 
constituted its trading assets and the dividend income accruing there-
from should be regarded as income from accruing therefrom should be 
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regarded as income from business. 
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During the pendency of these revision petitions the assessment for 
the assessment year 1957-58 was completed as a non-resident, and the 
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income was determined as receipt by way of dividends on it~ share 
--k holdings. 
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In the appeal to the Appellate Assistant Commissioner, it was 
claimed that the loss for the assessment year 1955-56 should be carried 
forward and set off against the income of the assessment year 1957-58 
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under sub-s. (2) of s. 24 because both the. losses and the income arose 
from business carried on by the appellant, but the appeal was dismissed 
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holding that there would be no loss if the loss for the assessment year 
1955-56 was set off against the income for the assessment year 1956-57 
and that the loss could not be legally set off directly in the assessment 
year 1957-58. 
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In further appeal, the Income-Tax Appellate Tribunal set aside 
the order of the Appellate Assistant Commissfoner and directed it to 
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dispose of the appeal afresh after determining whether the appellant 
was entitled to set off a business loss arising outside the taxable 
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territories for the assessment year 1955-56 against the dividend income 
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arising in the taxable territories for the assessment year 1957-58. The 
reference to the High Court was declined by the Appellate Tribunal. 
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The. revision application pertaining to the assessment year.1955-
56 was allowed subject to the claim being verified in regard to the 
figures and calculation of depreciation by the Income Tax Officer. The 
revision application pertaining to the assessment year 1956-57, how-. 
ever, was rejected .holding that the dividends earned by the appellant 
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from the investments in shares of companies carrying on the tea busi-
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ness could not be said to be a part of the appellant's business because 
the investments were not incidental to the appellant's business activities 
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and were not held as trading assets, that the companies from which the

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