STANDARD REFINERY & DISTILLERY LTD. versus COMMISSIONER OF INCOME-TAX, CALCUTTA

Citation: [1971] 3 S.C.R. 378 · Decided: 18-01-1971 · Supreme Court of India · Bench: K.S. HEGDE · Disposal: Appeal(s) allowed

Cited by 1 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

378 
STANDARD REFINERY & DISTILLERY LTD. 
v. 
COMMISSIONER OF INCOME-TAX:, CALCUTTA 
January 18, 1971 
[K. S. HEGDE AND A. N. GROVER, JJ.] 
Income-tax Act (11 of 1922), s. 22(4)-'Same busines.', tests for. 
The assessee owned a distillery and a refinery. In 1945, it obtained on 
lease the sugar factory belonging to another .company, and during the 
period from January to April 1946, it purchased about 41,000 shares of 
the lessor company, and in April 1947, sold the entire block of shares. 
The transa~tion resulted in a loss. 
After setting off the loss against the 
other income ·for the assessment year 1948-49, the unabsorbed loss was 
carried forward under s. ·24(2) of the Income.tax Act, 1922, to the assess-
ment year 1949-SO. But the assessee's claim to set off the loss pertaining 
to the sha;re business against the profits in th~ sugar business was negatived 
by the Department, the Appellate Tribunal and the High Court. 
In appeal to this Court, this Court reframed the question referred to 
the High Court as 'whether the business of dealing in shares and the busi-
ness of manufacturing sugar etc. constituted the same. l>usinc'Ss within the 
meaning of s. 24(2/'Qf the Act,' and directed the Tribunal to submit a 
supplementaty •tatementofcase. The Tribunal submitted that the two 
businesses had a single trading and profit and loss account, that they had 
been dealt with by a common organisation, that the transaction relating 
to shares was treated as part and parcel of the business of the assessee 
company, that a common fund was utilized 'for both businesses and that 
they were carried on iii the same place of business .. 
HELD : In determining whether two lines of business constitute the 
'came business' within the meaning of s. 24(2), the income-tax authorities 
must .consider the inter-connection, inter-lacing inter-dependence ·and unity 
furnished by the existence of common management, 
~mon business 
organisation, common administration, common fund .-- a common place, 
of business. 
Applying those. tes:s the share transaction as well as the · 
other business of the assessee should be considered u the 'same business.· 
(380 F-G] 
C.l.T., Madr~ v. Prithvi (nsuraricL Co. Lid., 63 i.T.R. 632, S.C. and 
Procedure ExchanM Corpn. Ltd. v. C.l.T. Central Ca/cu11a, 11 I.T.R. 739 
S.C. followed. 
· 
Satabganj ~ugar Mi/ls Ltd. v. C.l. T., Central Calcutta, 41 I.T.R., 72 
S.C. and Scales v. Ger,rge Thompson & Co. Ltd., 13 Tax Cas. 83, referr-
~ m. 
. 
CIVIL APPELLATE JURISDICTION : Civil A-p~l!I No. 1585 ·Of 
1968. 
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Appeal from tpe judgment and order dated July 23, 1963 
of the Cakutta Hi~h court in Income-tax Refereince No. 64 of 
1958. 
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c 
E 
F 
G 
S. C. Manchanda, Gobind Das and D. N. Gupta, for the appel-
H 
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S. Mitra, S. K. Aiyar and R. N. Sachthey, for the respondent. 
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A 
STANDARD REFINERY v. C.l.T. (Hegde, J.) 
37& 
1;he Judgme~ of the Court was delivered by 
Hegde, J. This is an assessee's appeal. The assess¢e is a 
public limited company and the appeal relates to the assessment 
for the assessment year 1949-1950, corresponding to the accoun-
ting year which is the calendar year ending on December 31, 
B 
1948. The assesse company was incorporated in 1942. At the 
beginning it owned a distillery at Unnao. It acquired a refinery 
in 1943._. With effect from June 1, 1945, the assessee company 
obtained on lease the New Sawan Sugar and Our Refining Co . 
.Quring the period from Iainuary 29, 1946 to April 23, 1946, the 
asses~~ ·company purchased 41,300 shares of the said company 
C for Rs. '12,17,006/-. 
On April 30, 1947 the entire block of 
shares was sold to Produce Exg.hange Corporation Ltd. for Rs. 
8,46,750/-. The transaction resulted in a loss of Rs. 3,70,356/-. 
This loss was trea~ by the assessee as a trading loss for the 
assessment year 1948-49-
After •ting off this loss against the 
other income of the assessee company, a loss of Rs. 2,27,085/-
was carried forward under s. 24 ( 2) of the Income-tax Act, 1922 
D 
(to be hereinafter:Crred to as the Act) to the year 1949-50 
and later years. 
e assessee claimed to set off this. unabsorbed 
loss pertaining to 
e share business against its profits in the sugar 
business for the· assessment year 1949-1950. The Income-tax 
Officer did not permit this set off. The Appellate Assistant Com-
missioner confirmed the order of the Income-tax Officer. 
In a 
E further appeal, the Appellate Tribunal agreed with the con-
clusion reached by t

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