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TMI Blog1971 (7) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... on rendered by the Income-tax Appellate Tribunal, Delhi Bench "B". On the facts leading to the reference, there is no dispute. The parent-company is Messrs. Oriental Carpet Manufacturers (London) Ltd. It has six subsidiary companies, namely : 1. East India Carpet Manufacturing Co. Ltd., Amritsar, 2. E. Hills Co. Pvt. Ltd., Mirzapur, 3. Oriental Carpet Manufacturers (Canada) Ltd., Toronto, 4. Oriental Carpet Manufacturers Co. (London) Pvt. Ltd., 5. Fritz La Rue Company, New York, 6. The Oriental Carpet Manufacturers (India) Private Ltd., Amritsar--the assessee-company. The parent-company (Messrs. Oriental Carpet Manufacturers (London) Ltd. (hereinafter referred to as the parent-company) does not carry on its own business. Its only source of income is dividends received from its six subsidiary companies. The parent-company, however, renders certain services to the subsidiary companies, namely : (a) arranged for overdraft facilities. (b) stood surety for Rs. 14 lakhs for the assessee-company for loans advanced by National Grindlays Bank Ltd. (c) advanced large amounts to the assessee-company for business purposes without charging interest. (d) rendered advice on te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ranted to it in India. The parent-company stands as a surety to the extent of Rs. 14 lakhs. The parent-company advances loans to the assessee-company for its business without charging any interest. In addition to this the parent-company advises the assessee company on all technical matters, business conditions and prospects, etc. It is clear that the parent-company is under no legal obligation to render all this assistance to the assessee-company. It is equally clear that but for the parent-company's undertaking, to do all this, the assessee-company would have been obliged to open its own office in London or to have some agent there to perform all these functions. It cannot be disputed that the parent-company has to spend large amounts for discharging all these functions. Besides, it has to run the risk of being a surety. Out of the total expense of pound 20,071, pound 10,294 have been spent under the head "Salaries and General, Charges" ; pound 698 under the head "Pensions and Benefits" pound 400 towards the audit fee ; pound 3,900 towards directors' remuneration ; pound 4,449 for other emoluments, and pound 330 towards pension. By common arrangement all the subsidiary companies h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to deduction under section 10(2)(xv) if it could satisfy the Tribunal that the expenditure was wholly and exclusively incurred for its own business. The Tribunal has found as a fact that it was so incurred. Therefore, on the findings of the Tribunal the argument is not open to the learned counsel for the department that the expenditure should be treated as having been incurred by the parent-company for its own business. The Tribunal nowhere found that it was so. It will be useful at this stage to refer to the observations of Lord Chancellor in Odhams Press Ltd.'s case : "Now these facts seem to me to be evidence upon which the Special Commissioner might reasonably arrive at the conclusion that the sum written off was not so written off wholly and exclusively for the trade and business of the appellants. No doubt it was better for the appellants that their subsidiary companies, and this one amongst them, should prosper and not be weighed down with debts. The same would be equally true of any company holding shares in another company and having trading relations with it. It is tempting to treat what I have called the subsidiary company as if it was part and parcel of the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so far as they held all the shares in it. Its dividends, if any, came to the appellants, and on a winding up of Coming Fashions Ltd., its assets after payments of debts, liabilities and costs would be the property of the appellants. On the other hand, there was also another and a quite different relationship between the two companies, that of tradesman and customer. It should be added that there is no suggestion that the sum of pound 2,927 was written off as a bad debt." Even these observations do not help the learned counsel. It will be proper at this stage to set out the facts of Odhams Press case to appreciate the Tribunal's decision : "The appellants are printers and publishers, and they hold controlling interests in some sixteen subsidiary companies, which own newspapers or other publications, or are printers, publishers, advertising agents, or carry on similar business. In particular the appellants hold all the shares in Coming Fashions Ltd. which compiles and issues for sale a periodical called Every-woman's. The appellants publish this periodical for Coming Fashions Ltd., upon a commercial basis, and from time to time have advanced on loan large sums to that company. In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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