COMMISSIONER OF INCOME TAX vs. AMARSINGHJI MILLS LTD.

ITR/292/1994HC GujaratGJHC24020368199424 November 2005Author: HONOURABLE MR. JUSTICE D.A.MEHTA,HONOURABLE MS. JUSTICE HARSHA DEVANI11 pages
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What were the facts?

The assessee, Amarsinghi Mills Ltd., for the assessment year 1983-84 (accounting period ended June 30, 1982), claimed set off and carry forward of business losses. The Assessing Officer disallowed this claim, which was upheld by the Commissioner (Appeals). The assessee's appeal to the Income-tax Appellate Tribunal (ITAT) was allowed. The assessee, previously manufacturing and selling cloth, sold its textile unit and commenced a new business of purchasing grey cloth, getting it processed, and then selling it. The Revenue contended this was a new business, disentitling the assessee to carry forward losses from the old business under Section 72 of the Income-tax Act, 1961.

What did the High Court hold?

The High Court held that the Tribunal was justified in its conclusion. The Court referred to the Supreme Court's decision in B.R. Ltd. (supra), which established tests for determining if a business is the same, including inter-connection, interlacing, interdependence, and unity of common management, business organisation, administration, fund, and place of business. The Tribunal had found common management and control, and unity of control, and that there was no difference in the business carried on in the two periods. The Revenue's argument that the Tribunal had not found common place of business was not considered a fatal flaw, especially given the elapsed time and the fact that the B.R. Ltd. decision was pressed into service earlier. The Court answered the reference in the affirmative, in favour of the assessee. The operative direction was to uphold the Tribunal's order, allowing the carry forward and set off of accumulated losses.

What were the issues?

1. Whether, as a question of law and fact, the Tribunal was right in holding that the new business carried out by the assessee could be considered the same as the earlier business, thereby entitling the assessee to the benefit of carry forward and set off of accumulated losses under Section 72 of the Income-tax Act, 1961? Assessee's Contentions: The assessee argued that the Tribunal had correctly applied the tests laid down by the Supreme Court in B.R. Ltd. Vs. V.P. Gupta, Commissioner of Income-tax, Bombay, [1978] 113 ITR 647 (S.C.) to determine if the businesses were the same. The Tribunal found common management and control, and unity of control, concluding that whether the assessee manufactured cloth or purchased it for processing would not change the nature of the business. Therefore, the Tribunal's order should be upheld. Revenue's Contentions: The Revenue contended that the Tribunal erred in granting the benefit. It argued that the entire textile unit was sold, and the subsequent activity of purchasing grey cloth, processing it, and selling it constituted an entirely new and distinct business. Reliance was placed on Section 72(1)(i) and its proviso, which requires the business for which the loss was computed to be continued. The Revenue cited the case of Tube Suppliers Ltd. Vs. Commissioner of Income-tax, [1985] 152 ITR 694 (Mad.) in support.

Which sections of the Income-tax Act were involved?

Section 72,Section 256(1),Section 71

AI-generated summary — verify with the full judgment below

ITR/292/1994 1/11 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE No.292 of 1994 For Approval and Signature: HONOURABLE MR.JUSTICE D.A.MEHTA HONOURABLE MS.JUSTICE H.N.DEVANI ===================================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether

this case

involves

a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ===================================================== COMMISSIONER OF INCOME TAX - Applicant(s) Versus AMARSINGHJI MILLS LTD. - Respondent(s) ===================================================== Appearance : MR MANISH R BHATT for Applicant(s) : 1, MR MJ SHAH for MR JP SHAH for Respondent(s) : 1 ===================================================== CORAM : HONOURABLE MR.JUSTICE D.A.MEHTA and HONOURABLE MS.JUSTICE H.N.DEVANI Date : 24/11/2005 ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE D.A.MEHTA)

1.

The Income-ta

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