Separate businesses and capital loss on sale of closed-unit machinery were not deductible against continuing business profits.

Where an assessee carried on glass manufacturing and had earlier operated a sugar business, the Tribunal's finding that the two were separate businesses was supported by evidence, including separate books, separate profit and loss accounts, and no interdependence. The question whether there was one business or more than one was treated as one of fact, and the court confined itself to whether evidence supported that finding. Once the sugar undertaking was found to be distinct and discontinued, the machinery left after closure formed part of capital assets, so loss on its sale was a capital loss and not deductible as a revenue deduction against the glass business under Section 10(2)(vii).

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Issues: Whether the loss on sale of machinery from the closed sugar business was a capital loss not deductible under Section 10(2)(vii) in computing the income of the glass business.

Analysis: The assessee carried on glass manufacturing and had earlier undertaken sugar manufacturing. The Tribunal found, on the facts, that the two activities were separate businesses: they had separate books of account, separate profit and loss accounts, and no interdependence or interconnection. Whether there was one business or more than one was a question of fact. On reference, the only legal inquiry was whether there was evidence to support the Tribunal's finding. The record disclosed sufficient evidence for the finding that the sugar business was distinct from the glass business. Once that finding stood, the machinery remaining after closure of the sugar business formed part of capital assets, and loss on its sale could not be treated as a revenue deduction of the glass business.

Conclusion: The question was answered against the assessee and in favour of the Revenue. The loss of Rs. 55,380 was not allowable as a deduction under Section 10(2)(vii) of the Income-tax Act, 1922.

Ratio Decidendi: Where two activities are found on evidence to be separate businesses, loss on sale of capital assets of the discontinued business is capital loss and is not deductible against the profits of the continuing business under the business-deduction provision.

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