Commissioner of Income Tax vs Singla Tea and Agriculture Industries Ltd.

On an application u/s 256(2) of the Income Tax Act, 1961, this court directed the Tribunal to refer the following question, set out at page 2 of the statement of case, for our opinion :

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in confirming the allowance of the carry forward and set off of the earlier year''s losses from tea growing and manufacturing business against the income from service charges received during the year ?"

In compliance with the direction, the Tribunal has referred the aforesaid question for our opinion.

The assessee''s tea estate was taken over by the Government of West Bengal on April 21, 1981. The writ petition was filed by the assessee. The High Court held that the taking over of the tea estate by the Government of West Bengal was illegal and accordingly directed the Government to restore possession of the tea estate to the assessee. Against that the Government went to the Supreme Court and till the decision of the Tribunal the matter was pending before the Supreme Court. The Income Tax Officer noticed that in spite of the decision of this court the management and control of the tea estate continued to remain with the West Bengal Tea Development Corporation, a Government of West Bengal undertaking. During the accounting year, therefore, the assessee received only service charges on account of services rendered to other companies in the matter of tea cultivation. The assessee-company, therefore, claimed set off of the business losses incurred while it was running the tea gardens against the income by way of service charges received in the accounting year relevant to the assessment years 1984-85 and 1985-86. The Income Tax Officer rejected the claim of the assessee on the ground that as per the proviso to Section 72(1)(i) of the Income Tax Act, 1961, the business in respect of which the loss was originally computed should continue to be carried on in the previous year in which the set off of loss is claimed. When the assessee has not continued the business in the previous year, in which it suffered loss, that loss cannot be set off against the income of the previous years, as it has not carried on the same business.

In appeal before the Commissioner of Income Tax (Appeals), the Commissioner of Income Tax (Appeals) has considered the claim of the asses-see. When there is a common management and control of the business, the carry forward of unabsorbed loss should be allowed to be set off against the business of the current assessment year and in appeal before the Tribunal, the Tribunal has confirmed the view taken by the Commissioner of Income Tax (Appeals) and a3so followed the decisions of the Supreme Court in the case of Hooghly Trust (Private) Ltd. Vs. Commissioner of Income Tax, West Bengal and Andaman and Nicobar Islands, and B.R. Limited Vs. V.P. Gupta, Commissioner of Income Tax, Bombay, .

None appeared for the assesses. Heard learned counsel for the Revenue.

Learned counsel for the Revenue submits that the issue is squarely covered by the decision of the apex court in the case of B.R. Limited Vs. V.P. Gupta, Commissioner of Income Tax, Bombay, . In the case of B.R. Limited Vs. V.P. Gupta, Commissioner of Income Tax, Bombay, , the apex court has taken into account the facts that when there was a common management and common control, common business organisation, common administration, common fund and a common place of business, set off of the carried forward of loss should be allowed against the profit of the current business. Both the activities that is import and export constitute the same business. Therefore, the loss suffered in the import can be set off in the subsequent years against the income earned by the assessee in the export business.

In the case in hand the facts are not in dispute that the assessee has suffered a loss while running the tea garden before the tea garden was taken over by the Government of West Bengal and thereafter, received the income on account of services rendered by the assessee to other companies in the matter of tea cultivation. In the case in hand also the management is common and running the tea garden and rendering the services for tea gardens in that way can be treated as the same business for the purpose of Section 72 of the said Act and in this view of the matter there is no infirmity in the order of the Tribunal.

In the result, we answer the question in the affirmative, that is, in favour of the assessee and against the Revenue.

The reference so made stands disposed of.

All parties are to act on a signed xerox copy of this dictated order on the usual undertaking.