# HOOGLY TRUSf (PRIVATE) LID v. COMMis.SIONER OF INCOME-TAX, WEST BENGAL AND ANDAMAN AND NICOBAR ISLANDS

- **Citation:** [1969] 3 S.C.R. 557
- **Court:** Supreme Court of India
- **Decided:** 1969-02-04
- **Case number:** Civil Appeals No. 1659 to 1661 of 1968
- **Bench:** J. C. Shah, V. Ramaswami, A. N. Grover
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/hoogly-trusf-private-lid-v-commis-sioner-of-income-tax-west-bengal-and-andaman-4612
- **Pages:** 8

## Headnote

rncome-tax Act (11 of 1922), s. 24(2) (before its amendment by the
Finance Act of 1955)-Business in several commodities--Lcss in oneSet off claimed against profits in others--QuesUon of fact-When High
Court can examine its correctness.
The asses.see carried on. business· in several commodities including cloth.
In tlie assessment years 1953-54 and 1954-55 the assessee suffered loss in
cloth business, and it was determined for the purposes of s. 24(2) of the
Income-tax Act, 1922 (as it stood before the amendment in 1955). During
the subsequent three assessment years, the Income-tax Officer refused to
allow the carry forward of these losses and their set off against the business profits of th°"" years on the ground that the losses determined in the
preceding years arose out of the cloth business which was different from
the other business carried on by the assessee.
He held that since the
cloth business was not carried on during the relevant year of account the
loss therefrom in preceding years could not be carried 'forward and set off
against profits o( other business.
The Appellate Assistant Commissioner
agreed with the Income-tax Officer. The Tribunal found (i)
that the
asscssce's dealings in cloth started very early and the introduction of control only changed the prooedure of carrying on the business, (ii)
that
the assessee has been doing business in several commodities and its trading in each commodity did not constitute separate business, (iii) that the
cloth business never assumed the proportion or the stature of a distinct
and separate business and (iv) that there was evidence to show dovetailing of cloth business into the general section. The question, as to whether
on the facts and in the circumstances of the case, the cloth business and
the business j.n the general section constituted the same business within
the meaning elf s. 24(2) as it stood then, was referred to the High Court.
Relying on most of the facts determined by the Appellate Assistant Commissioner, the High Court answered the question against the asse>See.
In
appeal, to this Court, the assessee contended that (i) the findings on questions of fact given by the Tribunal were final and it was not open to the
High Court to examine their ccrrectness in
the absence · of any proper
question on the point; and (ii) on the findings of the Tribunal the losses
on account of cloth business were liable in law to be carried forward and
set off against the profits during the relevant assessment years.
HELD : The question must be
answered
in the affirmative and in
favour of the assessee.
(i) In spite of the form in which the question had been referred it was
not open to the High Court to examine the correctness of the conclmioos
of the Tribunal on facts. If the Tribunal does not consider the evidence
covering all the matters and bases its findings upon some evidence only
ignoring other essential material that would amount to a misdirection in
law and the findings would give rise to a qu.,.,tion liable to be referred to
the High .Court. But it is equally well settled that if the question about
the validity of the findings of fact is sought to be raised for one reason or
558
SUPREME COURT REPORTS
[1969] 3 S.C.R.
I
another, reference of a proper question' challenging those findings must first
be sought before those findings can l)e challenged before the High Court.
No attempt was made before the Tribunal to have any such question referred and in the absence of a proper question it was not open to the High
Cowt to accept· the findings of the Appellate Assistant Commissioner in
preference to those given by the Tribunal or to come to any independent
conclusion itself on the facts.
The Tribunal does not appear to have di<-
cussed the entire evidenee on which the findings were based but the order
of the Appellate Assistant Commissioner and his findings as also the entire
record were before it and there is nothing to suggest that all the material
'facts were not present to its m

## Text

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HOOGLY TRUSf (PRIVATE) LID.
v.
COMMis.SIONER OF INCOME-TAX, WEST BENGAL AND
ANDAMAN AND NICOBAR ISLANDS
February 4, 1969
(J. C. SHAH, V. RAMASWAMI AND A. N. GROVER, JJ.]
rncome-tax Act (11 of 1922), s. 24(2) (before its amendment by the
Finance Act of 1955)-Business in several commodities--Lcss in oneSet off claimed against profits in others--QuesUon of fact-When High
Court can examine its correctness.
The asses.see carried on. business· in several commodities including cloth.
In tlie assessment years 1953-54 and 1954-55 the assessee suffered loss in
cloth business, and it was determined for the purposes of s. 24(2) of the
Income-tax Act, 1922 (as it stood before the amendment in 1955). During
the subsequent three assessment years, the Income-tax Officer refused to
allow the carry forward of these losses and their set off against the business profits of th°"" years on the ground that the losses determined in the
preceding years arose out of the cloth business which was different from
the other business carried on by the assessee.
He held that since the
cloth business was not carried on during the relevant year of account the
loss therefrom in preceding years could not be carried 'forward and set off
against profits o( other business.
The Appellate Assistant Commissioner
agreed with the Income-tax Officer. The Tribunal found (i)
that the
asscssce's dealings in cloth started very early and the introduction of control only changed the prooedure of carrying on the business, (ii)
that
the assessee has been doing business in several commodities and its trading in each commodity did not constitute separate business, (iii) that the
cloth business never assumed the proportion or the stature of a distinct
and separate business and (iv) that there was evidence to show dovetailing of cloth business into the general section. The question, as to whether
on the facts and in the circumstances of the case, the cloth business and
the business j.n the general section constituted the same business within
the meaning elf s. 24(2) as it stood then, was referred to the High Court.
Relying on most of the facts determined by the Appellate Assistant Commissioner, the High Court answered the question against the asse>See.
In
appeal, to this Court, the assessee contended that (i) the findings on questions of fact given by the Tribunal were final and it was not open to the
High Court to examine their ccrrectness in
the absence · of any proper
question on the point; and (ii) on the findings of the Tribunal the losses
on account of cloth business were liable in law to be carried forward and
set off against the profits during the relevant assessment years.
HELD : The question must be
answered
in the affirmative and in
favour of the assessee.
(i) In spite of the form in which the question had been referred it was
not open to the High Court to examine the correctness of the conclmioos
of the Tribunal on facts. If the Tribunal does not consider the evidence
covering all the matters and bases its findings upon some evidence only
ignoring other essential material that would amount to a misdirection in
law and the findings would give rise to a qu.,.,tion liable to be referred to
the High .Court. But it is equally well settled that if the question about
the validity of the findings of fact is sought to be raised for one reason or
558
SUPREME COURT REPORTS
[1969] 3 S.C.R.
I
another, reference of a proper question' challenging those findings must first
be sought before those findings can l)e challenged before the High Court.
No attempt was made before the Tribunal to have any such question referred and in the absence of a proper question it was not open to the High
Cowt to accept· the findings of the Appellate Assistant Commissioner in
preference to those given by the Tribunal or to come to any independent
conclusion itself on the facts.
The Tribunal does not appear to have di<-
cussed the entire evidenee on which the findings were based but the order
of the Appellate Assistant Commissioner and his findings as also the entire
record were before it and there is nothing to suggest that all the material
'facts were not present to its mind except that they are not mentioned in
detail.
Its findings, therefore. must be accepted as final
and the only
question which it was open to the High Court to examine was whether the
cloth business could be regarded as the same business within the meaning
of s. 24(2) of the Act.
[563 B-D; 563 G]
India Cement Ltd. v. Commissioner of Income-tax, Madras, 60 I.T.R.
52, 64 and Hazarar Pir Mahomed Shah Saheb Roza Committee v. Commissioner of Income-tax, Gujarat, 63 I.T.R. 490, 496, referred to.
(ii) The question whether on the application of the settled tests dilferent ventures carried on by the assessee from the same business for the
purpose cif •. 24(2) is a mixed question of law and fact The fair test is
whether there was any inter-connection, any inter-lacing, any inter-dependence, any unity were found to exist by virtue of the common m~ge
ment, common business organisation, common
administration, common
fund and common place of business. [564 D-E]
Setabganj Sugar Mills Ltd. v. Commissioner 'of Income-tax, Central.
Calcutta, 41 I.T.R. 272, 274, Scale! v. George Thomp,Pn &Co. Ltd., [19271
13 T.C. 83; Manila/ Dahyabhai v. Commissioner of Income-tax, Bombay
City, 37 l.T.R. 398 and Commissioner of Income-tax,· Madras v. Prithvi
Insurance Co. Ltd. 63 I.T.R. 632, 637, refetred to.
Applying these principles the conclusions which the Tribunal arri•ed
at were correct.
CIVIL APPELLATE JURISDICTION : Civil Appeals No. 1659 to
1661 of 1968.
Appeals from the Judgment and order dated March 26, 1965
of the Calcutta High Court in Income-tax Reference No. 130 of
1961.
Sukumar Mitra and D. N. Mukherjee, for the appellant (in all
the appeals).
S. T. Desai, S. K. Aiyar, R. H. Dhebar and B. D. Sharma,
for the respondent (in all the appeals).
The Judgment of the Court was delivered by
Grover, J.
These three appeals are by certificate from a common judgment of the Calcutta High Court answering .the f?llowing question referred to it by the Income Ta'I: Appellate Tnbunal
in the negative and against the assessee :
"Whether on the facts and in the circumstances of the
case, the cloth business of the assessee and its business
in the General Section constituted the ~rune business
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HOOGLX TRUST v. C.I.T. (Grover, /.)
within the meaning of s. 24(2) of the Indian Income-tax
Act as it stood at the material time."
559
According to the statement of the case the assessee is a private
limited company owning shares and securities and also doing business. The relevant assessment years are 1955-56, 1956-57, 195758, the corresponding accounting years being the calendar years
1954, 1955 and 1596. In the assessment for the years 1953-54
and 1954-55 losses amounting to Rs. 2,13,898 and Rs. 46,050
respectively were determined for the purposes of s. 24(2) of the
Income tax Act 1922, hereafter called the "Act''.
In the first
year a loss of Rs. 2,08,686/- arose in cloth business whereas the
balance of the loss occurred in the General section and the manure
section. In the second year a loss of Rs. 46,050 occurred mainly in cloth business. During the three assessment years in questio~ the Income tax Officer refused to allow the carry forward
of these losses and their set off against the busines~ profits of those
years on the ground that the losses determined in the preceding
yea-TS arose out of the cloth business which was different from the
other business carried on by the assessee'and since the cloth business was not carried on during the relevant year of accoljllt the
loss therefrom in pre.;eding years could not be carried forward and
set off against profits of the other business. The Appellate Assistant Commissioner agreed with the cr , 'usion of the Income tax
Officer. He rejected the contention of the asessee that common
ownership, common direction
and control. common financial
arrangement, common staff and common balance sheet necessarily established that the business was single.
He took the view
that the character of the cloth business carried on by the assessee
was entirely different from the other business. He laid particular
emphasis on the fact that the assessee acted as a dhtributing agent
on behalf of the Government for cloth and cement and the mode
of carrying on of that business was altogether different from that
of its ordinary business.
He referred to the fact that the cloth
business had a separate overdraft account with the Bank with
which stocks of cloth had been pledged and there was separate
staff for the cloth busjness even though the assessee claimed that
a part of the staff in the General section also looked after the cloth
business.
The assessee contended before the Tribunal in aopeal
that till the end of 1945 its business was confined only to shares
and the management of zamindari properties and that dealin!( in
cloth began only in 1946 and in 1950 the a'sessee was droling in
manure and in 1952, in paints as well.
After the introrluction
of control on cloth in 1948 the company was appointed a~ a nominated buyer approved bv the Government doing busine<s at ji,
own risk under conditions prescribed by the Government bv whom
prices at which the goods were to be sold were fixed.
C'ertain
expenses relating to the cloth business like motor car and godown
. 560
SUPREME COURT REPORTS
[1969] 3 S.C.R .
expenses were charged to the General account, whereas certain
expenoes relating to the General section like rent and telephone
charges were charged to the cloth account while audit fees were
allocated to a different department.
The control over the different activities of the assessee was not exercised by the Director
but by common mana7erial staff and there was sufficient financial
inter-relation between the cloth business and the General section.
The Tribunal held that the assessee's dealings in cloth started as
early as 1946 and that the introduction of control by the Government changed the procedure of carrying on the business. It was
further found that the assessee had been doing business in several
commodities one after the other or along with the other and apart
from the fact that a separate profit and trading account was maintained for cloth business there was nothing to suggest that the
cloth business assumed the proportion or the stature of a distinct
and separate business.
It was accordingly held that the transactions in cloth were part and parcel of a single business carried on
by the assessee and the loss therefrom could not be segregated
as a loss from a distinct business for the purpose of s. 24(2) of
the Act.
The High Court referred to certain other facts as found by
the Appellate Assistant Commissioner. It had been found by him
that the assessee was mainly dolJ11 banking business from 1942
to 1948 although it had, during that period, income from other
sources.
In the year 1948 it started acting as the distributing
agent of cloth on behalf of the Government. That business continued till the year 1952 when control on cloth was lifted. The
assessee disposed of in retail stocks left over during the first few
months of the year 1953. Thereafter the assessee ceased to have
any dealings in cloth.
The High Court quoted extensively from
the order of the Appellate Assistant Commissioner.
It felt that
the Tribunal had not dealt with the matter in a satisfactory way.
Reference was made to its own decision in another case in which
it had been held by the High Court that in order to find out whether the business of an assessee was the same in two different years
the . prin1ary consideration was the nature of the business and the
way it was conducted. Merely because the assessee's business was
one of a dealer in several kinds of commodities it could not be
said that it has only one business for the purpose of s. 24(2) when
a part of its activities had come to an end. Relying on most of
the facts determined by the Appellate Assistant Commissioner the
High Court found difficulty in agreeing with the view on the Tribunal that there was any dovetailing of the cloth business into the
General section. This is what the High Court said finally :
"In our opinion, (i) that the inference drawn by the
appellate tribunal was not warranted by the facts on record and (2) that the cloth business was separate from
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HOOGLY TRUST v. C.J.T. (Grover,/.)
561
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the assessee's business in general section notwithstanding
that there was some interconnection of expenses or
control."
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In order to decide the points raised before us it is necessary
first to refer to the relevant provisions of the Act. Section 6 gives
six heads of income profits and gains which shall be chargeable to
income tax. Out of these the fourth head is "profits and gains of
business, profession or vocation".
Section 10 taxes the profits
of business, profession or vocation carried on by the assessee. Sec·
tion 24(1) provides that where any assessee sustains a loss of profits
or gains for any year under any of the heads mentioned in s. 6, he
shall be entitled to have the amount of the loss set off against his
income profits or gains under any other head in that year. It is
unnecessary to refer to the proviso and the Explanations). Prior
to its amendment by the Finance Act 1955, sub-s. (2) of s. 24 ran
as follows :-
"(2) 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 any business, profession or vocation, and the loss cannot be wholly set off
under sub-section (I), so much of the loss as is not so set
off or the whole loss where the asscssee had no other
head of income shall be carried forward to the following
year and set off against the profits and gains, if any,
of the assessee from the same business, profession or
vocation of that year ...... "
Sub-s. (2) of s. 24 was substituted by s. 16 of the Finance Act of
1955 the material portion for our purposes being :
"(2) 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 any business, profession or vocation, and the loss cannot be wholly set off
under sub·s. (1), so much of the loss as is not set oil' or
the whole loss where the assessee had no other head of
income shall be carried forward rt> the following year,
and
(i) ................................... .
(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
562
SUPREME COURT REPORTS
[196~] 3 S.C.R.
which the loss was originally sustained continued to be
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carried on by him in that year; and
( ''')
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The argument before us has proceeded on the footing that the
matter has to be decided under sub-s. (2) as it stood before its
amendment in 1955. The principle contentions on behalf of the
appellant-assessee are two-fold. It is urged firstly that the findings
on questions of fact given by the Tribunal were final and it was
not open to the High Court to examine their correctness in the
absence of any proper question on the point. Secondly,
on the findings
of the Tribunal the losses on account
of cloth business were liable in Jaw
to be carried forward
and set off against the profits during the relevant assessment years.
On the other hand counsel for the respondent maintains that it was
open to the High Court to prefer the findings of the Appellate
Assistant Commissioner to those of the Tribunal because the Tribunal had based its conclusions on a misreading of evidence and
on a consideration of irrelevant evidence.
Counsel further says
that the Tribunal's decision was hardly a decision in the eye of
law and that it had been rightly held by the High Court that th~
cloth business did not fall within the meaning of the expression
"the same business" in s. 24(2) of the Act as it stood before the
amendment of 1955. It has been held by this Court in Setabganj
Sugar Mills Ltd. v. Commissioner of Income tax Central, Calcutta
( 1 ) that the question whether on the application of the settled tests
different ventures carried on by the a~sessee form the same business for the purpose of s. 24(2) is a mixed question of Jaw and
fact. Reference was made in this case to the principle stated by
Rowlatt, J. in Scales v. George Thompson & Co, Ltd.{') that the
real question is whether there was any inter-connection, any interlacing, any inter-dependence, any unity at all embracing those two
businesses. The following observations from the judgment of this
·court may be reproduced :
"No doubt, findings of fact are involved because a
variety of matters bearing on the unity of the business
have to be investigated, such as unity of control and
management, conduct of the business through the same
agency, the inter-relation of the businesses, the employment of same capital, the maintenance of common
books of account, employment of same staff to run the
business, the nature of the different transactions, the pos"
sibility of one being closed without affecting the texture
of the other and so forth. When, however, the true facts
have been determined, the ultimate conclusion is a legal
inference from proved facts, and it is one of mixed law
(I) 41I.T.R.272,'274.
(2) [1927] 13 T.C. 83.
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and fact, on which depends the application of s. 24(2)
of the Act. ............. "
It is not possible to accept the submission made on behalf of
the respondent that in spite of the form in which the q_uestion had
been referred it was open to the High Court to examme the correctness of the conclusions of the Tribunal on facts.
There can
be no dispute that if the Tribunal does not consider the evidence
covering all the matters and bases its findings upon some evidence
only ignoring other essential material that would amount to a
misdirection in law and the findings would give rise to a question
liable to be referred to the High Court. But it is equally well settled that if it is sought to raise the question about the validity of
the findings on fact for one reason or another, reference of a proper question challenging those findings must first be sought before
those findings can be challenged before the High Court : See India
Cement Ltd. v. Commissioner of Income tax,
Madras(')
and
Hazarat Pir Malwmed Shah Saheb Roza Committee v. Commissioner of Income tax, Gujarat('). No attempt was made before
the Tribunal to have any such question referred and in the absence
of a proper question it was not open to the High Court to accept
the findings of the Appellate Assistant Commissioner in preference
to those given by the Tribunal or to come to any independent ~n
clusion itself on facts.
The Tribunal gave the following findings : (1) The appellant's
dealings in cloth started as early as 1946 and the introduction of
control only changed the procedure of carrying on the business
in the sense that the appellant became the nominated buyer .approved by the Government.
(2) The appellant had been doing
business in several commodities one after the other or along with
the other and its trading in each commodity did not constitute
separate business.
(3) The cloth business never
assumed the
proportion or the stature of a distinct and separate business. ( 4)
There was sufficient evidence to show dovetailing of the cloth section into the General section. The conclusion of the Tribunal on
these findings was that the transactions in cloth were part and
parcel of a single business carried on by the appellant and did not
constitute a distinct business for the purpose of s. 24(2), The Tribunal does not appear to have discussed the entire evidence ~m
which the findings were based but the order of the Appellate Assistant Commissioner and his findings as also the entire record were
before it and there is nothing to suggest that all the material facts
were not present to its mind except that they are not mentioned in
detail.
Its fin.dings, therefore, must be accepted as final and the
only question which it was open to the High Court to examine wa~
whether the cloth business could be regarded as the same businesi
(l) 601.T.R. 52, 64.
(2) 631.T.R. 490, 496.
564
SUPREME COURT REPORTS
[1969) 3 S.C.R·
within the meaning of s. 24(2) of the Act. A great deal of reliance
has been placed on a decision of the Bombay High Court in Manila! Dahyabhai v. Commissioner of Income tax, Bombay City(').
There the claim that the businesses were the same was sought to
be substantiated on the ground that only one set of accounts was
being maintained; that both the businesses were carried on in the
same premises with the help of the same staff; that the capital employed was the same, the receipts in respect of one of them being
utilized for the purpose of the other and that the terms of overhead and other expenses were common. It was held that the aforesaid factors did not necessarily lead to the inference that the businesses must be regarded as one and the same. It was observed
that though not conclusive but an important test was whether one
of the two businesses conducted by the assessee could be stopped
without affecting the texture or framework of the other. However
in Commissioner of Income-tax, Madras v. Prithvi Insurance Co.
Ltd. (2) this Court said "we are unable to agree with counsel for
the Commissioner that, the test, whether one of the businesses can
be closed without affecting the conduct of the other business, is a
decisive test in determining whether the two constitute the same
business within the meaning of s. 24(2)." In that very case the
test laid down by Rowlatt, J., in Scales v. George Thompson & Co.
Ltd., (') was accepted as a fair test and inter-connection, interlacing, inter-dependence and unity were found to exist by virtue of
the
common management,
common business
organisation,
common administration,
common fund and common place of
business .
. . ·We have no manner of doubt that on applying these principles
the conclusion at which the Tribunal arrived was correct and the
question referred should have been answered in the affirmative
and in favour of the assessee.
The appeals are consequently allowed with costs throughout and the· answer returned by the High
Court is hereby discharged. One hearing fee.
Y.P.
(1) 371.T.R. 398.
(2) 63 I.T.R. 632,637.
(3) [1927]13 T.C, 83
LS Sup CI/69=2,S00-13-3-70-GIPF.
Appeals allowed.
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