Judgment

GROVER, J. - These three appeals are by certificate from a common judgment of the Calcutta High Court answering the following question referred to it by the Income Tax Appellate Tribunal 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 same business within the meaning of S. 24(2) of the Indian Income-tax Act as it stood at the material time".

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, 1957-58, the corresponding accounting years being the calendar years 1954, 1955 and 1956. 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 Section 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 question the Income-tax Officer refused to allow the carry forward of these losses and their set off against the business profits of those 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 and 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 of the other business. The Appellate Assistant Commissioner agreed with the conclusion of the Income-tax Officer. He rejected the contention of the assessee 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 distributing 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 business 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 appeal that till the end of 1945 its business was confined only to shares and the management of zamindari properties and that dealing in cloth began only in 1946 and in 1950 the assessee was dealing in manure and in 1952 in paints as well. After the introduction of control on cloth in 1948 the company was appointed as a nominated buyer approved by the Government doing business at its own risk under conditions prescribed by the Government by whom prices at which the goods were to be sold were fixed. Certain expenses relating to the cloth business like motor car and godown expenses were charged to the General account, whereas certain expenses 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 managerial 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 pro