' MUHAMMAD ZAHOORUL HAQ, J.-- The private applicant had referred the following three questions for opinion of the High Court under section 60(1) of the Income-tax Act, 1922:-
(i) "Whether in the facts and circumstances of the case the Tribunal was justified in holding that the applicant-Company was not entitled to have its trading losses out of the repairing plant brought forward and set off against the profits of the assessment year 1971-72 under section 24(2) of the Income-tax Act, 1922?
(ii) Whether in the facts and circumstances of the case, the Tribunal had relevant material to come to the conclusion that the repairing and selling units of the Company did not constitute the same business?
(iii) Whether in the facts and the circumstances of the case, the Tribunal was justified in holding that the applicant Company was not entitled for the adjustment of depreciation in respect of the repairing unit under clause (b) of proviso to section 10(2) (vi) against the profits of the assessment year 1971-72."
2. The relevant facts are that Pakistan Tyre and Rubber Company Limited is a subsidiary of Dunlop Limited of U.K. They import and sell tyres and tubes. It had a plant for the repairs of tyres and tubes at Lyallpur, which was finally closed and sold out in 1968.
3. For the assessm ent year 1971-72 income of Rs,1,97,253 was determined by the I.-T.O. The applicant sought a set off of brought forward losses of early years of Rs,8,35,887. The I.-T.O. Disallowed the set-off.
4. The set off claim had been in respect of three items, (a) revenue loss from tyre business carried on till assessm ent year 1967-68 but not continued thereafter, (b) revenue loss from tyre retreading plant set up at Lyallpur but sold out during the year ended 31-12-1968 and (c) unabsorbed depreciation arising out of tyre retreading plant at Lyallpur. The I.-T.O. Held that the revenue losses arising out of tyre retreading plant set up at Lyallpur and subsequently sold out in 1968 cannot be set off against current profit for the reasons that the tyre retreading business is distinct from import and sale of tyres and it does not qualify under the provisions of section 24(2)(ii).
5. It is not necessary to consider the other disallowances made by the I.-T.O. Because the losses arising out of tyre import business were allowed to be set off by the appellate Tribunal in the appeal of the applicant and in respect of unabsorbed depreciation arising out of the assets of tyre retreading plant, the learned counsel for the applicant, Mr. Nasim Ahmad Khan appearing for the applicant, has submitted before us that he does not press the question No,3 in respect of unabsorbed depreciation. Consequently the question No,3 does not need answer now.
6. The question Nos. 1 and 2 are tied together. In this respect it would be relevant to refer to the following discussion and findings of the Appellate Tribunal.
"Now the only connexion that the learned authorised representative of the assessee sought to establish between the two activities was that the repairing unit was set up for the purpose of making supplies by the appellant to one of its main customers and as soon as the supplies to that party ceased the repairing unit was closed down. Apart from the fact that there is no evidence to show that but for retreading plant no supplies could be made to Indus Basin Project Contractors so that the sale of tyres to them was entirely dependent on setting up the repairing unit most of the tests laid down in the case already discussed viz. 1967 PTD (Trib.) 60 are far from fulfilled in the instant case. It has not been shown to us that only one set of accounts was maintained, that the businesses were carried on with the help of the same staff and that the receipts in respect of one business were utilised for the purpose of other business indiscriminately and vice versa etc. In fact the business of sale of tyres was continued even after the repairing unit was closed down. Further although the 'appellant had allegedly set up the repairing unit for the purpose of retreading tyre supplies to the Indus Basin Project Contractors, there is no material to hold that this unit could not function independently of the sale of tyres business, it being a matter of common knowledge that business of repairing unit is not at all dependent on the business of sale of tyres so that unless the latter business is carried on the former cannot be carried on. We have, therefore, reached the conclusion that the Income-tax Officer has rightly not set off the loss arising in the repairing unit against the income from the other business."
' It is, therefore, apparent that the Appellate Tribunal has found on a question of fact that there was no basis before them to find that only one set off account was maintained for the tyre retreading plant and the tyre sale business and that the 2 businesses were carried on with the help of the same staff and that receipts of one business were utilised indiscriminately for the purpose of other business. These are findings of fact, in fact it was for the applicant to establish on record that there was such inter connection, interlacing and interdependence between its two units of business namely the tyres sales business and the tyre retreading business which would make them a single unit.
7. The only submission which had been made before the Appellate Tribunal and it has been repeated before us by Mr. Nasim Ahmed Khan, the learned counsel for the applicant is that this matter is of common sense that the sale and repairs of business come together. The learned counsel is very much right in the submissions but only to the extent that the sales and repairs of a business can come together but he cannot extend this theory to the extent that in case a party is carrying on business of sales and repairs of certain items then in every case it must be treating it as the same business. In fact it would depend upon the circumstances in each case as to whether the sale business is so interconnected with the repairs business that they have to be treated as one business. In the present case before the Tribunal the only thing submitted was that the tyre retreading business was started as a consequence of sale contract of tyres between the applicant company and the Indus Basin Contractors and the greatest reliance was placed upon the fact that the business of retreading was closed and sold in 1968 after the tyres sales contract had come to an end. In our opinion this fact alone is not sufficient to make two units of business as the same business. The agreement in question has not been placed either before the Appellate Tribunal or the I.-T.0. Which could establish the unity in the two businesses. And it could be possible that the applicant considered it to be profitable to start another business of retreading as a consequence of the sale of huge tyres to Indus Basin Contractors without there being any obligation upon them to repair the tyres supplied by them. The mere fact that the retrading business was closed and sold in 1968 after the conclusion of the supply contract of tyres could not make the two businesses as one business. In fact the applicant had failed to provide material before the departmental authorities which could establish that the two businesses although being carried on at two different places viz. Karachi and Lyallpur were in fact one business.
8.The three findings of fact by the Appellate Tribunal referred to we do point out that the two businesses were existing independently of each other and there is nothing on record to establish otherwise except common sense proposition that the sales and repairs come together. But the same is not enough to establish that in fact the business of sale and repairs in this case was the same. Consequently questions Nos. 1 and 2 are answered in the affirmative. .