LexCOMMISSIONER OF INCOME-TAX, MADRAS versus PRITHVI INSURANCE CO. LTD.
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. \ B c D E F G H COMMISSIONER OF INCOME-TAX, MADRAS v. PRITHVI INSURANCE CO. LTD. October 26, 1966 (J. C. SHAH AND V. RAMASWAMI, JJ.] Indian Income-tax Act, 1922, s. 24(2)-lnsuronce company carrying on life insurance business as well as general insurance business-Such busi- nesses whether one business for purpose of rection. The respondent rompany carried on business of life and general insu- rance. In assessment·proceedings ior the year 1951-52, the Income.tax Officer held that the life insurance business and the general insurance busi- ness carried on by the company were 'distinct and separate' and the loss carried forward from the previous year in respect of life insurance business could not be set off under s. 24(2) against the profit from the general in- surance business. The Appellate Assistant Commissioner and the Tribunal confirmed the view of the Income-tax Officer. The Tribunal based its de- cision primarily on the provisions of the Income-tax Act. which provided different methods of computation of the taxable income of life insurance business and of general insurance business. In reference the High Court decided in favour of the company, and the Revenue appealed. The test suggested on behalf of the Revenue for determining whether the two busi- nesses were one business within the meaning of s. 24(2) was whether one of them could be closed without affecting the conduct of the other. HELD : (i) The test suggested on behalf of the Revenue could not be accepted. If one business cannot conveniently be carried on after the closure of the other, there would be a strong indication that the two busi- ness constitute "the same business", but no decisive inference may be drawn from the fact that after the ~losure of one business another may convenien- tly be carried on. [948 DJ (ii) Whether two or more lines of business may be regarded as the "same business" or different business depends not uf>on the special methods prescribed by the In.come-tax Act for computation of the taxable income, but upon the nature of the lines of business, the nature of their organisa- tion, management, the source of the capital fund utilised, methods of book keeping and a host of other related circumstances which stamp the lines of business as same or distinct. [94 7 HJ Scales v. George Thompson & c,,. Ltd., 13 T.C. 89, referred to. (iii) In the present case there was little doubt that the two businesst! constituted one composite business : the company was entitled to carry on the life insurance business and the general insurance business under its Memorandum of Association,. and the business were attended to by the Branch Manager and the Agents without any distinction, there was one common administrative organisation and the expenses incurred in connec- tion with busincs. both for administration and for heads of expenditure such as salary of the staff, postage, staff welfare fund and general charges, were common. [948 BJ The High Court was therefore right in holdin.g that the life insurance busines:, and the general insurance business constituted the_ same business within the meaning of s. 24(2) of the Act. f949 BJ - . 144 SUPREME COURT REPORTS [1967) I S.C.R. CMr. APPELLATE JURISDICTION : Civil Appeals Nos. 729-732 A of 1965. Appeals by special leave from the judgment and order dated May 3, 1963 of the Madras High Court in Tax Case No. 196 of 1960. R. M. Hazarnavis, Gopal Singh and R. N. Sachthey, for the 8 appellant (in all the appeals). S. Swaminatlzan and M. S. Narasimhan, for the respondent (in all the appeals). The Judgment of the Court was delivered by Shah, J. The respondent, a public limited company, carried on in the relevant years of account business of insurance-life and general. In each of the calendar years 1944 to 1948 relating to the assessment years 1945-46 to 1950-51, the Company suffered loss in the life insurance section, and made profit in the general insurance section. Till the assessment year 1950-51 the loss suffered in the life insurance section was allowed by the Revenue authorities to be carried forward and set off under s. 24(2) of the Indian Income-tax Act, 1922, against profits from the general insurance section in the subsequent year. In proceedings for assessment for the assessment year 1951-52 the Income-tax Officer held that the life insurance business and the general insurance business carried on by the Company were "distin
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