Business loss set-off denied for discontinued concerns treated as capital in nature and not against dividend income.

Where an assessee claimed losses from undertakings that had already ceased operations, the business set-off provisions were confined to profits and losses of businesses actually carried on during the year. The distinction between separate businesses and one interlocked business was treated as a question of fact, and on the facts the five concerns had been discontinued while only shareholding activity continued. The claimed losses were therefore treated as arising from discontinued businesses and as capital in nature, so they could not be set off against dividend income.

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Issues: Whether the assessee was carrying on separate businesses during the year of account so as to attract the business provisions of the Income-tax Act, 1922, and whether the losses from discontinued concerns, being capital in nature, could be set off against dividend income.

Analysis: The assessee-company had multiple undertakings, but the evidence showed that the five concerns in respect of which loss was claimed had ceased to be carried on and only the shareholding activity continued. The distinction between distinct businesses and one interlocked business is one of fact. The principle of set-off under the Act applies to profits and losses of businesses actually carried on, and the computation provisions for business income do not extend to concerns that have already ceased operations. On the facts, the claimed losses arose from discontinued businesses and were capital in nature.

Conclusion: The assessee was not entitled to set off the claimed losses against dividend income, and the answer was against the assessee.

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