Judgment

SHAH, J. : - The appellant is a public limited company doing business as a dealer in diverse commodities, and also in stocks and shares. The Company maintains its accounts according to the calendar year. In the year of account 1949 the Company suffered a loss of Rs. 3,71,700 in the sale of shares of public limited companies. In proceedings for assessment of income-tax for the assessment year 1950-51, the Income-tax Officer disallowed the claim to set off loss against the profits from transactions in other commodities in that year. The appeal filed before the Appellate Assistant Commissioner was unsuccessful. But the Appellate Tribunal upheld the claim of the Company.

2. In the meanwhile assessment for the year 1951-52 was completed, and the income of the Company was computed at Rs. 1,00,777. In proceedings for assessment of income for the assessment year 1952-53 the Income-tax Officer computed the income of the Company from its business at Rs. 3,39,899 and declined to take into account the loss suffered by the Company in the share transactions. In the view of the Income-tax Officer, even if the loss be treated as a trading loss it could not be set off against the business income of the Company, because the loss resulted from transactions in shares which constituted a business distinct from the business in other commodities.

3. In appeal against the order to the Appellate Assistant Commissioner, the order of the Income-tax Officer was confirmed. The Appellate Assistant Commissioner held that the business in shares and the business in other commodities were not the "same business" within the meaning of S. 24 (2) of the Income-Tax Act, 1922, as then in force. He observed that a common capital, a common set of employees and a common set of accounts and common business premises are not "the deciding factors in determining whether the various activities carried on by the assessee constituted one business or separate businesses:" it is the nature of the business which is "the main factor" and where separate profit or loss was ascertainable and the nature of the business was different, the activities could not be held to form one and single unit for the purposes of S.24 (2) of the Indian Income-tax Act.

4. The Tribunal disagreed with the Appellate Assistant Commissioner. The Tribunal observed that there was complete unity of control and shares were one of a number of commodities in which the Company dealt in the ordinary course of business. There was, in the view of the Tribunal "no element of diversity or distinction or separateness about the transactions in shares." Accordingly, the tribunal upheld the claim of the appellant Company and directed that the loss be set off under S. 24 (2) of the Indian Income-tax Act then in force.

5. The Tribunal referred the following question to the High Court of Calcutta:

"Whether on the facts and in the circumstances of the case, the business activities of the company to wit, dealings in shares and its dealings in other commodities and selling agency on commission basis constituted the same business within the meaning of section 24 (2) of the Indian Income-tax Act?"

The High Court held, following their judgment in Shree Ramesh Cotton Mills Ltd. v. Commr. of Income-tax, (1967) 64 ITR 367 that the "essential matter to be considered in determining whether the two businesses carried on by the assessee constitute the same business, is about the nature of the two commodities, the manner in which they are conducted being a secondary consideration". They observed that "unity of control or management, the employment of the same or common finance, the user of the same business premises and the record of the transactions in the same set of books of accounts are matters to be considered only when it is found that two businesses are of the same nature. Merely because the transactions in shares consist of sales and purchase as do dealings in other commodities like sugar, molasses etc. the two activities cann