9911796707
|
Home
Issues involved: Determination of whether interest paid on capital borrowed for a discontinued business should be allowed as a deduction, based on the integration of different business activities carried out by a registered firm.
Summary: The High Court of Madras considered a case involving a registered firm engaged in various business activities, including the manufacture and sale of scented tobacco and cigars, as well as a transport business. The firm borrowed funds, with a portion being utilized for the transport business. The Income-tax Officer disallowed a portion of interest claimed as a deduction, leading to proceedings under section 263 of the Income-tax Act, 1961. The Commissioner directed an addition to the firm's total income, which was challenged by the assessee before the Tribunal. The Tribunal found unity of management, common fund, and interconnections between the different business activities, concluding that they formed one business. The Tribunal overturned the Commissioner's decision, leading to a question of law being referred to the High Court. In its judgment, the High Court highlighted the interconnected nature of the firm's business activities, managed by the same partners with common funds and administration. The Court referenced Supreme Court decisions emphasizing the criteria for determining whether different lines of business constitute the same business, including common management, organization, and interdependence. Based on these principles and the factual findings, the High Court upheld the Tribunal's conclusion that the transport business and other activities formed a single composite business. The Court rejected other decisions cited, affirming the Tribunal's legal inference. Consequently, the question was answered in favor of the assessee, with no order as to costs.
|
