JUDGMENT Malik, C.J.
1. This is one of the many cases that have recently come up before us, in which a great deal of difficulty has been caused by reason of the Appellate Tribunal not having clearly found the facts in its appellate order or not having clearly set out the facts in the statement of the case.
2. The assessee, a Hindu undivided family, has been carrying on business for many years The head office of the business is at Banaras with two other branches in the same city. The assessee has also a branch in Calcutta. At the head office at Banaras wholesale business is done in Benarsi cloth in the name of Dalsukhrai Jaidayal. At Lakhi Chabutra branch, Banaras, wholesale business is done in cotton cloth in the name of Jaidayal Gajanand. The other branch at Thatheri Bazar, Banaras, does business in silk in the name of Gajanand Balmukund. The branch in Calcutta does business in the name of Jaidayal Gajanand. In the words of the Tribunal, this branch launched forth in fairly large speculations in linseed, hemp, hessian, gold, silver, jute, rice, cotton yarn and shares. It also did some business in Banarsi cloth. In the Calcutta branch two sets of account books were maintained, one related to the speculative part of the business which consisted of forward transactions and the other related to business done in Banarsi goods. In the assessment year, 1939-40, account year 1938-39, the Calcutta branch incurred a loss of Rs. 6,411 in share business. In the year 1940-41 it showed a profit of Rs. 3006 in share transactions and a much larger profit in the other speculative transactions which appear-ed to have been in linseed and hemp. The assessee claimed that the loss of Rs. 6,411 of the account year 1938-39 should be set off against the profits made in speculative transactions in Calcutta in the year 1940-41. The Income-tax Officer, however, allowed only the sum of" Rs. 3006, which was the profit made in share dealings, to be set off and held that the balance of the loss of Rs. 3,405 could not be set off against the profits made in speculative transactions on the ground that under Section 24(2) the losses for the previous year could be set off only against the profits made in the following year m the same business. The relevant portion of the Sub-section, relied upon, reads as follows :
"Where any assesses sustains a loss of profits or gains in any year ...... tinder the head 'Profits and gains of business, profession or vocation,' and the loss cannot be wholly set off under Sub-section (1), the portion not so set off shall be carried forward to the following year get off against the profits and gains, if any, of the assessee from the same business, profession or vocation for that year ........"
The question, therefore, is whether the speculation in shares and the speculation in the other commodities was the same business or not. If it was the same business, the assessee was entitled to set off the loss of the previous year against the gains made from such business in the subsequent year, otherwise not.
3. It is now well settled that the question whether the profits made in the following year are the profits from the same business or a different business is a question of fact. This has been held in case after case in the Courts in England and in the Courts in India, see, for example, the cases of Scales v. George Thomson & Co. Ltd., (1927) 13 Tax Cas. 83: (138 L. T. 331) and Govindram Bros, Ltd. v. Commissioner of Income-tax, Central, Bombay, A. I. R. (34) 1947 Bom. 247 : 14 I. T. R. 764.
4. The Tribunal, however, in its appellate order, appears to have treated this question more as a question of law than as a question of fact. The whole of the appellate order on this point is as follows:
"At the' end of the accounting year for the assessment for 1939-40, there was a loss of Rs. 6,411 in share dealings in Calcutta. This loss was carried forward to the following year, the profits of which were assessed in 1940-41. The Income-tax authorities found that there was a profit in that year 'from share dealings' to the extent of Rs. 3,006. So out of the loss carried forward, they allowed Rs. 3,006 and disallowed' the balance of Rs. 3,405. This they did by following the clear wordings of Section 24 (2) of the Income-tax Act which says that such loss carried forward can be set off against the profits and gains if any of the 'same business.' It is contended on behalf of the appellant that the businesses in Calcutta should be taken as one whole and should not be dissected into different parts. The business in Calcutta consisted in dealings in cotton, jute, rice, wheat, cloth, yarn, gold and silver and shares and securities. We are concerned with dealings in shares and securities. Surely the dealings In them are quite distinct from the dealings in the other materials mentioned above. Dealings in shares and securities are not dependant on the dealings in the other things mentioned, and the stoppage of the one would not affect the running of the other. It cannot reasonably be urged that business in shares and securities is not a separate business, but is so interlocked with other businesses of the assessee as to be really one business. The words 'same business" in Section 24 (2) are really significant. If there were no dealings in shares and securities in the year of accounts, though the other businesses carried on in Calcutta bad been in existence that year, the loss carried forward could hardly be allowed as a set off against the profits of these other businesses. In this view, we must uphold the action of the Income tax authorities, and see no reason to interfere with their decision that the sum of Rs. 3,405 could not be set off against the profits from the other businesses in Calcutta."
It was assumed that dealings in shares and securities must be quite distinct from the forward dealings in cotton, jute, rice, wheat, cloth, yarn, gold and silver. The further reason given is that dealings in shares and securities are not dependent on the dealings in the other things mentioned and the stoppage of the one would not affect the dealings in the others. So far as I can see, these are the only two grounds which form the basis of the appellate order of the Tribunal.
5. Mr. Gopalji Mehrotra, learned counsel for the assessee, at one time attempted to support the order on the ground that if an assessee speculates in different kind a of commodities, then the dealings in each kind of commodity must necessarily be a separate business. This, to my mind, is obviously wrong. The question whether the business is the same business must depend on the manner in which the business is carried on and what are the facts that have to be considered has been laid down by Rowlatt J. in Scales v. George Thomson & Co. Ltd., (1927) 13 Tax Cas. 83 : (138 L. T. 331), It has to be found whether there was any inter-connection, interlacing, inter-dependence and unity embracing the two businesses. No such attempt seems to have been made by the Appellate Tribunal.
6. On an application made under Section 66 (1) to state a case the Appellate Tribunal refused the application on the ground that no question of law arose for determination. On a further reference to this Court under Section 66 (2), a Bench of this Court was of the opinion that the case did raise a question of law of the true construction to be placed on the words "same business, profession or vocation" in Section 24 (2). This Court, when directing the Appellate Tribunal to state a case, observed as follows:
"We should wish to ask the Appellate Tribunal in its statement of the case to set out all those facts as to the constitution and operation of the assessee's business and the branches of it and their relation to each other in the statement of the case which may enable this to be dealt with when it cornea to this Court."
We have searched in vain for the facts as to the constitution and operation of the assessee's business and the branches of it and their relation to each other in the statement of the case. We have had, therefore, great difficulty in finding the facts on which the opinion has to be given. I am, however, still of the opinion that it was more a question of fact and degree than a question of law and the question of fact and degree should have been decided by the Tribunal rather than by us. In a similar case, however, reported in Messrs. Govindram Bros. Ltd. v. Commissioner of Income-tax, Central, Bombay, 14 I. T. R. 764 : (A. I. R. (34) 1947 Bom. 247). Kania J. had, under Section 66 (4), asked for further findings, but, as the further findings were not received, the Bench hearing the reference gathered such materials as it could from an affidavit and gave its opinion on the basis thereof. The relevant paragraph of the affidavit on which the learned Judges of the Bombay High Court placed reliance was as follows:
"From the date of its incorporation a part of the business of the applicants consisted of speculation in different markets in different commodities . . . From the "commencement speculation business in different markets and in different commodities constituted one and the same business of the applicants. In proof of the fact that the applicants' dealings in several markets in different commodities form part of the same business I produce the following evidence. One of the objects of the incorporation is to carry on speculation business in any part of the world in any commodity. For brevity's sake I crave leave to refer to the memorandum and articles of the company when produced. Speculation business is one unified and organised activity of the applicants. Speculation business is carried on with the same staff and with the aid of the same accounts and in the same premises. The nature of all speculative business is the same and the difference in commodities or the difference in the markets makes no difference to the nature of the speculative business."
To analyse this pact of the affidavit, it sets out that (1) the object was speculation in whatever commodity and whichever part of the world it was considered profitable; (2) the speculation was one unified and organised activity of the assessee; (3) it was carried on with the same staff; (4) there was one set of account?; and (5) the business was carried on in the same premises.
Chagla J. was doubtful whether speculation could be called a business. That point has not been raised before us and we need not express any opinion but if a person carries on speculation, whether on the share market or in hessian or in any other commodity in an organised manner with the object of making income therefrom, there appears to be no reason why it should not come under the definition of the word 'business' in the Income-tax Act which is as follows:
" 'business' includes any trade, commerce, or manufacture or any adventure or concern in the nature of trade, commerce or manufacture."
7. In the case before us we wanted the learned counsel for the Commissioner of Income-tax to give us the facts on the basis of which he wanted us to hold that it was a separate business. Learned counsel urged that the burden of proof was on the assessee. I am inclined to agree, as it is the assessee who claims a set off and he has to prove that the necessary requirements of Section 24 (2) are fulfilled. I shall deal with the facts on which the assessee relies but the facts to negative them are stated by learned counsel for the Commissioner of Income-tax to be these:
(i) that the speculation business was in different types of commodities and therefore these must be separate businesses;
(ii) that though there may have been the same set of books but for each different commodity there was a different ledger head and, according to learned counsel, each ledger head must be deemed to contain the accounts of a separate business;
8. On the other hand, learned counsel for the assessee has relied on the following facts:
(i) that the Calcutta branch 'lunched forth" in fairly large speculations from 1932-33 in various types of commodities; (cotton, yarn, shares, jute, rice, gold, silver, hemp and linseed are the various commodities mentioned in the appellate order of the Tribunal and also in the order refusing the application under Section 66 (1);
(ii) that the assessee did not speculate in all the above-mentioned commodities each year but only in such of them as he considered profitable and in the account year 1939-40 he seems to have speculated only in shares, linseed and hemp;
(iii) that the speculation was carried on by the same persons and from the same branch in Calcutta; (It is not clearly set out anywhere that there was only one office, but, in view of the fact that only one business is mentioned and only one set of books, we are asked to assume that there must have been only one business premises);
(iv) that the capital was one and was received from time to time, as necessity arose, from the head office at Banaras;
(v) that there was one set of books for the speculative business though there may have been separate ledger heads in them for each commodity;
(vi) that the profit and loss account was prepared under one head and not under separate heads;
(vii) that we should assume that the staff must have been the same since the work was done from the same place;
(viii) that all the business was carried on under one business name, e. g. Jaidayal Gajanand;
(ix) that the final accounts were made out each year at Banaras; and
(x) that the nature of the business was to get the difference on the rise and fall in the prices of commodities in the market and it did not matter whether it was share or linseed or hemp or cotton or gold or silver.
On these facts, we are asked to follow the 'precedent of the Bombay High Court and to hold that the business was not a different business as was assumed in the appellate order of the Tribunal.
9. I was inclined to send the case back to the Tribunal under Section 66 (4), but in view of the fact that in the order of this Court under Section 66 (2), dated 19th April 1945, clear directions were given as to what the statement of the case should contain and yet the directions were not properly complied with, it does not appear to be necessary to delay the hearing further. On the facts gathered by learned counsel for the assessee from the various documents, which have been included in the paper book along with the statement of the case, I propose to answer the questions referred to us for opinion in the following manner:
10. The answer to question No. 1 is that the loss of Rs. 6,411 in the year 1939-40 in speculative business in Calcutta could be set off under Section 24 (2), Income-tax Act against the profits made in the speculative business by the Calcutta Branch in the year 1940-41.
11. As regards question No. 2, my answer is that the Bum of Rs. 6,411 could be set off against not only the profits from dealings in shares but also in the other forward contracts but not against the dealings in cloth carried on in the Calcutta Branch of the assessee's firm.
12. The assessee is entitled to the costs of this reference which we assess at Rs. 300.
S.N. Seth, J.
I agree.