Law:

Section:

Section 72 of the Income-tax Act, 1961 [Corresponding to section 24(2) of the Indian Income-tax Act, 1922] - Losses - Carry forward and set off of business losses - Assessment year 1946-47 - Although assessee-company was authorised by memorandum of association to undertake and carry on various lines of business, in actual fact it did only celluloid business up to year 1944 - In March, 1944 celluloid business was closed down and company switched over to other lines of business. In accounting year 1944-45, when company was carrying on celluloid business, it suffered some loss and this was loss which company wanted to carry forward and set off against profits derived from new lines of business in accounting year 1945-46 - Whether loss in celluloid business in assessment year 1945-46 could not be carried forward and set off against profits of other businesses in assessment year 1946-47 when assessee ceased to carry on celluloid business during assessment year 1946-47 - Held, yes FACTS Although the assessee-company was authorised by the memorandum of association to undertake and carry on various lines of business, in actual fact it did only celluloid business up to the year 1944. In that year, the celluloid business was closed down and the company switched over to share dealings and joint ventures. In the accounting year 1944-45, when the company was carrying on the celluloid business, it suffered some loss in business. It was this loss which the company carried forward and wanted to set off against the profits derived from the new lines of business in the accounting year 1945-46. The ITO and the AAC held that the company was not entitled to set off its loss of the previous year against the profits of the year 1945-46 because the profits had not been derived from the same business, as required by section 24(2). However, on second appeal, the Tribunal allowed the assessee's claim. On reference : HELD The question as to whether various business activities of an individual or a firm or a company constitute one business or are in fact distinct and separate businesses may, at times, prove to be one of extreme difficulty but in the instant case there was no difficulty…

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