Temporary business suspension and inter-business set-off remain allowable when the business is kept alive for resumption.

Temporary suspension of a business due to adverse market conditions does not amount to cessation where the assessee keeps the business alive through maintenance of establishment, accounts, licence, borrowings, and continuing business expenses with an intention to resume. On those facts, the arecanut business remained in existence during the accounting year and the related loss was allowable. The loss from that business was also capable of being set off against profits from the assessee's rice mill business, because business income is computed on an aggregated basis and separate business lines do not, by themselves, prevent inter-business set-off when both are carried on by the same assessee.

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Issues: (i) Whether the assessee's arecanut business, though temporarily suspended during the accounting year, was still being carried on so that the loss claimed therein was allowable; (ii) whether the loss from the arecanut business could be set off against the profits of the rice mill business.

Issue (i): Whether the assessee's arecanut business, though temporarily suspended during the accounting year, was still being carried on so that the loss claimed therein was allowable.

Analysis: The business question depends on the facts of each case. Temporary inactivity, caused by adverse market conditions, does not by itself amount to closure or cessation of business. The assessee maintained the establishment, kept the accounts, held an import licence, borrowed funds for the business, and incurred establishment and interest charges while waiting for better market conditions. These circumstances showed that the business had not been abandoned.

Conclusion: The arecanut business was still in existence during the accounting year, and the loss claimed therein was allowable.

Issue (ii): Whether the loss from the arecanut business could be set off against the profits of the rice mill business.

Analysis: Income-tax is levied on the aggregate of income under the relevant heads, and where a person carries on more than one business, the profits and losses of those businesses are to be aggregated in computing business income. Separate accounts or distinct lines of activity do not, by themselves, prevent set-off if the businesses are carried on by the same assessee and the losses form part of the business computation under the Act.

Conclusion: The loss from the arecanut business could be set off against the profits of the rice mill business.

Final Conclusion: The reference was answered in favour of the assessee, with the claimed business loss held allowable and available for set-off in computing the assessee's taxable business income.

Ratio Decidendi: Temporary suspension of a business does not amount to cessation if the business is kept alive and continued with the intention of resumption, and the profits and losses of distinct businesses carried on by the same assessee are to be aggregated for business-income computation and set-off under the Act.

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