Unity of control test governs whether import and export activities form one business for loss set-off purposes.

Unity of control and functional integration determine whether import and export activities are the same business for carry-forward and set-off of unabsorbed loss under section 24(2) of the Indian Income-tax Act, 1922. Common management, business organisation, administration, funds and a common place of business support a finding of one integrated business. Mere differences in the goods dealt with or in the mechanics of import and export do not, by themselves, make the activities distinct. On the facts described, the import and export operations were dovetailed and carried on under common control, so the earlier loss could be adjusted against later business profits.

---

---

Issues: Whether the assessee's import business and export business constituted the same business for the purpose of carrying forward and setting off the unabsorbed loss under section 24(2) of the Indian Income-tax Act, 1922.

Analysis: The governing test is whether there is inter-connection, inter-lacing, inter-dependence and unity between the activities, with unity of control being a decisive indicator. The existence of common management, common business organisation, common administration, common fund and a common place of business supports the conclusion that the activities form one business. Mere differences in the nature of goods dealt with, or in the mechanics of import and export, are not by themselves sufficient to establish separateness. The relevant inquiry is not whether the two lines of activity are similar, but whether they are so integrated as to constitute the same business; on the facts found, the import and export activities were dovetailed and carried on under common control.

Conclusion: The import and export activities constituted the same business, and the assessee was entitled to set off the unabsorbed loss against the subsequent profits.

Final Conclusion: The orders of the Commissioner were unsustainable, and the assessee's claim to carry forward and adjust the earlier loss against later business profits succeeded.

Ratio Decidendi: For section 24(2) of the Indian Income-tax Act, 1922, the decisive test for identifying the same business is the presence of unity of control and functional integration, shown by inter-connection, inter-lacing and inter-dependence; mere differences in commodities or in commercial methods do not make the businesses distinct.

---