Judgment

SABYASACHI MUKHARJI, J:- These appeals arise out of the orders of the High Court of Karnataka dated 10th August 1973 for the assessment years 1959-60, 1960-61 and 1961-62 by certificate granted by the High Court under Section 66A(2) of the Indian Income-tax Act, 1922, hereinafter referred to as the Act.

2. The assessee is an individual. He was carrying on business in the relevant assessment years in purchase and sale of groundnut oil and was also running an oil mill. He was also an abkari contractor. On 1st June, 1957, he had gifted away a part of the oil mill machinery, viz., a solvent extraction plant, to his wife and three minor children. A firm was constituted by the assessees wife and another person to the profits of which the three minor sons of the assessee were also admitted. The mill premises as well as the remaining machinery of the assessee were leased out to this firm which carried on the business of the manufacture and sale of groundnut oil. The assessee had also entered into an agreement with the firm under which certain services were rendered to the firm by way of management. The assessee was entitled to get commission at the stipulated rates On the purchase of oil cake and sale of decoiled cake made by the firm. The assessee himself continued to carry on business in purchase and sale of groundnut cake and oil on a small scale. The assessee also continued his business as abkari contractor.

3. The assessee had incurred huge losses in his individual business in the earlier years which were. being carried forward from year to year up to the assessment year 1958-59. The loss carried forward from the assessment year 19,58-59 was Rs. 7,88,734/-. The assessees profits from his own business for 1959-60 were Rs. 14,324/-. The share income of the assessees wife and minor children from the firm for the assessment year 1959-60 was Rs. 24,592/-. The said income was included in the computation of the total income of the assessee under Section 16(3) of the Act for the assessment year 1959-60. The assessee claimed set off of the loss carried forward from the assessment year 1958-59 against the profits of his own business as also the share income of his wife and minor children. The Income-tax Officer rejected the claim for set off in so far as it related to the share income of his wife and minor children. Similar claims for set off were made in the assessment years 1960-61 and 1961-62 but were rejected.

4. On the appeals preferred by the assessee, the Appellate Assistant Commissioner allowed the set off claimed on the ground that the assessee himself is deemed to be carrying on the business from which the share income was derived by his wife and minor children. The revenue appealed to the Income-tax Appellate Tribunal, Hyderabad Bench. The Tribunal held that although the assessee was not carrying on the business of manufacture and sale of oil during the years under appeal, he was continuing to carry on the business of oil in general; that the firm did carry on the same business as was hitherto carried on by the assessee but there was no connection between the assessee and the business carried on by the firm and they were two different entities and as such, the assessee could not be said to be carrying on the business out of which the share income of the wife and minor children arose. Accordingly it held that the assessee was not entitled under Section 24(2) of the Act to claim set off of his losses against the income of his wife and minor children.

5. The following question of law was referred to the High Court :

"Whether, on the facts and in the circumstances of the case, the assessee would be entitled to carry forward and set off the losses against the share income of the assessees wife and minor children in respect of the assessment year 1959-60 under Section 24(2) of the Income-tax Act, 1922?"

6. The same consequences followed for the-assessment years 1960-61 and 1961-62. For all these years, the references under Section