Kochu Thommen, J. - The question which ahs been referred to us by the Income-tax Appellate Tribunal, Cochin Bench, is as follows :-
'Whether on the facts and circumstances of the appellants case, the Appellate Tribunal ought not to have come to the conclusion that the appellant is entitled to carry forward the loss from ready business relating to the assment years 1963-64 and 1964-65 and set off the same against the business income for the assessment year 1968-69 onwards.'
2. The relevant facts of this case are : The assessee as a limited company with its registered officer at Cochin. The assessee had three branch offices at Alleppy, Calicut and Badagara. It carried on business in him produce. The assessment for the year 1968-69 was completed on 27-9-1968. The officer determined a profit of years 1963-64 and 1964-65 to be brought forward and set off against the profit for 1968-69 as shown below :
Asst. year
Amount of loss brought forward and set off.
1963-64
Rs. 41,738
1964-65
Rs. 3,379
Rs. 45,117
3. The Additional Commissioner of Income-tax, acting under section 263 of the Income-tax, Act 1961, called for and examined the records of the proceedings. He issued notice to the assessee to show cause why the assessment order for 1968-69 should not be modified so as to disallow the above set off as, according to him, the business had been discontinued prior to the relevant previous year. The assessee contended that the business was never discontinued, although it was lying dormant for a couple of years due to adverse trade conditions. The Additional Commissioner rejected this contention and held that the business had been closed down for three or four years earlier to the relevant previous year. He therefore directed the Income-tax Officer to revise the assessment by deleting the carry forward and set off. On appeal by the assessee, the Tribunal confirmed the above direction of the Additional Commissioner.
4. We shall now read the relevant portion of section 72 of the Income-tax Act.
'72. (1) Where for any assessment year, the net result of the computation under the head 'profits and gains of the business or profession' is a loss to the assessee, not being a loss sustained in a speculation business, and such loss cannot be or is not wholly set off against income under any head of income in accordance with the provisions of section, so much of the loss as has not been so set off, or where the assessee has income only under the head 'Capital Gains' relating to capital assets other than short-term capital assets and has exercised the option under sub-section (2) of that section or where he has no income under any other head, the whole loss shall, subject to the other provisions of this Chapter, be carried forward to the following assessment year, and -
(i) it shall be set off against the profits and gains, if any business profession carried on by him and assessable for that assessment year :
Provided that the business or profession for which the loss was originally computed continued to be carried on by him in the previous year relevant for that assessment year; and
(ii) xx xx xx
(2) xx xx xx
(3) xx xx xx
5. The question is whether the business of the assessee had been discontinued. If it was in fact discontinued, as found by the Tribunal the assessee would not be entitled to carry forward the losses for the years 1963-64 and 1964-65 and have then set off against the profits and gains of the year in question. Counsel for the assessee contended that the companys business had never been closed down but it had only been lying dormant for a period of owing to adverse conditions. He raised on certain decisions to point out that merely because a business had been inactive due to adverse conditions or other peculiarities of the trade, the business itself could not be considered to have been discontinued. One of the decisions cited for this purpose was Kirk and Randall Ltd. vs. Dunn (8 T.C. 663 at 669) where the facts are as follows : The assessee-company
'persisted in seeking for business - business which, if they got, they would have had to finance some how and to carry out which they would have had to acquire plant and workmen whether the business was in this country or elsewhere. But they did not get business. They had their directors all the time, and the directors drew their fees and their secretary drew his fees, and they also had bills for typing and so on, and bills for legal services; .... Now the legal expenses and the stationery charges, and the directors travelling expenses, which are a large sum, are connected with their efforts to get business, but they did not get any. That went on till 1920, and then they did get something.'
Based on these facts, Rowlatt J. came to the conclusion that the company carried on business during the relevant period, and such finding arrived at on the basis of the relevant facts is not a finding of a pure fact but an inference of law drawn from specific facts found. The Commissioner of Inland Revenue vs. The south Bihar Railway Co. Ltd. (12 T.C. 657), the House of Lords considered the question whether a company which had become inactive could be said to have discontinued its trade or business. Lord Sumner refer to the activities of the company as follows :
'It is obvious that the Companys objects have by on means been accomplished. It is obvious, too, that during its present period of dormant life it has very little to do. I do not attach much importance to the domestic operations of declaring and paying dividends, remunerating directors and presenting reports, but the operation of receiving and thus discharging the annuity payments goes on continuously, and however simple, it is not a mere passive acquiescence. It is the transaction of business between debtor and creditor resulting periodically in the discharge of a debt. The present is not the case of a company existing to do one act only and once all ... The important thing is that the old business still continues of getting some return for capital embarked in the line. There has not been such a termination of the business formerly carried on or such a complete transfer of it to a new trading company as has been the criterion of ceasing to carry on business ...'
Based on these facts Lord Sumner says :-
'Business is not confined to being busy; in many businesses long intervals of inactivity occur. In the present case at any rate, I think that on change has occurred to enable your Lordships to say that the Companys carrying on of business is a thing of the past, or that the Commissioner could property find that it is so. Indeed, I do not think there has been much change. The concern is still a going concern though a very quiet one.'
Referring to the finding of the Commissioners, Viscount Cave, L.C. says that it is
'not a finding of pure fact, but is an inference of law founded upon the specific facts found in the case and accordingly that the decision was open to review.'
6. On the basis of the above decisions, counsel for the assessee contends that the finding of the Tribunal as regards the discontinuance of the business is an inference of law which can be questioned in these proceedings. The facts specifically found in those cases clearly showed that the business, although dormant, had not been discontinued. From the mere fact of inactivity it could not be inferred that the business had been stopped. In the present case the Tribunal has clearly found that the business had been closed down during the assessment years 1966-67 and 1967-68. The assessee had in fact admitted before the Tribunal in an earlier proceeding for the year 1967-68 that the business had been discontinued. A dispute had then arisen regarding the disallowance of a bad debt amounting to Rs. 1,18,716/- The Tribunal in I.T.A. No. 6774/68-69 held as follows :
'Admittedly, in this case the business was not carried on by the assessee during the relevant previous year as it had discontinued three or four years previously.'
Referring to this admission, the Tribunal in the present case says as follows :
'.... business was totally discontinued for the assessment years 1966-67 and 1967-68. There was no purchase or sale of any produce during these two years. Even for the assessment year 1965-66, there was non purchase at all. Only the stock on hand of Rs. 37,253/- of copra was disposed of. There circumstances along with the assessees own course of its appeal for the assessment year 1967-68 lead to only one inference and that its; the business was discontinued (and was not lying dormant) before the commencement of the relevant previous year.'
This is a clear finding of fact by the Tribunal. This finding has not been challenged by the assessee by raising a specific question. Unless the assessee has a case that the finding of the Tribunal on this question of fact is without any evidence or that the finding is perverse, irrational or arbitrary, and a specific question in such terms is raised before us, the assessee cannot now contend that the Tribunal has gone wrong in its finding. Here no such question has been raised, and therefore the only inference that can be drawn, on the basis of the unchallenged facts, is the inference that the Tribunal itself has drawn. (See Aluminium Corporation of India Ltd. vs. Commissioner of Income Tax, West Bengal (86 I.T.R. 11); Commissioner of Income-tax, Poona vs. Manna Ramji and Co. (86 I.T.R. 29); Rameshwar Prasad Bagla vs. Commissioner of Income-tax, U.P. (87 I.T.R. 421).
7. In the result, we answer the question referred to us in the negative, that is, in favour of the Department and against the assessee. We direct the parties to bear their respective consts in this Tax Referred Case.
8. A copy of this judgment under the seal of the High Court and signature of the Registrar will be forwarded to the Income-Tax Appellate Tribunal, Cochin Bench.