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Issues Involved:
1. Disallowance of commission paid to M/s. Standard Electrode Corporation. 2. Deduction of expenditure incurred for raising loans by the issue of debentures. Summary: Issue 1: Disallowance of Commission Paid to M/s. Standard Electrode Corporation The question referred at the instance of the assessee was whether there was any evidence before the Tribunal to find that the expenditure of Rs. 1,42,289 paid to M/s. Standard Electrode Corporation was not incurred wholly and exclusively for business purposes. The Income-tax Officer disallowed this amount, and the Appellate Assistant Commissioner upheld this disallowance, citing no evidence of services rendered by the Corporation. The Tribunal followed its earlier decision for the assessment year 1964-65, where a similar disallowance was upheld. The High Court, referencing its decision in I.T.R. No. 64 of 1982 (Modi Industries Ltd. v. CIT [1993] 200 ITR 329), affirmed that there was evidence for the Tribunal to disallow the commission, thus answering the question in favor of the Revenue and against the assessee. Issue 2: Deduction of Expenditure for Raising Loans by Issue of Debentures The question referred at the instance of the Revenue was whether the Tribunal was justified in holding that the business of manufacturing M.S. special alloy wires and billets was an extension of the existing business and not a new business, thereby allowing a deduction of Rs. 2,61,918. The Income-tax Officer disallowed this expenditure, considering it related to setting up a new steel unit. The Appellate Assistant Commissioner upheld this view, noting separate books, staff, and financial management for the new unit. However, the Tribunal, applying the test from CIT v. Prithvi Insurance Co. Ltd. [1967] 63 ITR 632, found unity of control and common fund between the new and existing businesses, thus allowing the deduction. The High Court, referencing multiple Supreme Court decisions, including Produce Exchange Corporation Ltd. v. CIT [1970] 77 ITR 739 and B. R. Ltd. v. V. P. Gupta, CIT [1978] 113 ITR 647, affirmed that the nature of the business lines was irrelevant, emphasizing unity of control and interlacing of businesses. Consequently, the Tribunal's decision was upheld, answering the question in the affirmative and in favor of the assessee.
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