9911796707
TMI Blog1992 (10) TMI 74X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowed. This Corporation had been appointed as the sole selling agent of the assessee-company for a period of five years with effect from July 27, 1963, vide resolution of the board of directors of the assessee-company dated July 27, 1963. The Income-tax Officer came to the conclusion that the expense to the extent of Rs. 1,42,289 was not legally warranted and the same was disallowed. The Appellate Assistant Commissioner, in appeal, came to the conclusion that there was no evidence to show that M/s. Standard Electrode Corporation rendered any service for which they could be paid commission on the ground of commercial expediency. This conclusion of the Appellate Assistant Commissioner was in consonance with the earlier decision for the assessment year 1964-65. In further appeal to the Income-tax Tribunal, the disallowance was upheld. The Tribunal also followed a similar view which had been taken by it in the assessee's case in respect of an earlier assessment year 1964-65. As the reference had been made in respect of the assessment year 1964-65, for the present year in question, viz., 1965-66, the aforesaid question of law was again referred by the Tribunal, at the instance o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt received formed part of the aggregate sums of the company and they were so inextricably mixed up that the amount received by way of issue of debentures could not be separately identified. The Appellate Assistant Commissioner, however, came to the conclusion that the business of manufacture of alloy steel and billets was a new business and he came to this conclusion for the following reasons: "(i) The nature of the items to be manufactured was not in any way connected with the items already manufactured by the assessee company and with a view to finance the scheme, the Controller of Capital Issues was approached for the issue of 7 per cent. debentures of the face value of Rs. 60 lakhs out of which Rs. 50 lakhs were actually issued. (ii) Separate books of account were maintained for this unit which had a separate staff to manage and control its day to day activities. (iii) A separate factory building was constructed adjoining the other units in which the steel unit was erected. (iv) The financial management was also separate from the other units because the amount loaned from the head office was separately shown in the balance-sheet and separate profits were worked out for thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n which the business was being done could be regarded as the same business or different businesses. The Tribunal decided in favour of the assessee but the High Court came to a different conclusion and it held that the inference drawn by the Appellate Tribunal was not warranted by the facts on record and that the cloth business was separate from the appellant's business in the general section notwithstanding that there was some interconnection of expenses or control. The assessee thereafter filed an appeal to the Supreme Court and the Supreme Court came to the conclusion that in the absence of a proper question about the validity of the findings of facts arrived at by the Tribunal, it was not open to the High Court to accept the findings of the Appellate Assistant Commissioner or to come to any independent conclusion itself on facts. The Supreme Court further reaffirmed the principle enunciated in Prithvi Insurance Co.'s case [1967] 63 ITR 632 (SC) and came to the conclusion that if there was common management, common business Organisation, common administration, common fund and common place of business then, one could come to the conclusion that there was interconnection, interlaci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 67] 63 ITR 632 (SC) came to the conclusion that (at page 654 " Thus, the unity of control and the other circumstances adverted to above show that there was dovetailing or interlacing between the business of import and the business of export carried on by the assessee and that they constitute the same business. " In coming to this conclusion, the Supreme Court, while referring to the case of Produce Exchange Corporation [1970] 77 ITR 739 (SC), observed that the decisive test was the unity of control and not the nature of the two lines of business. From the aforesaid observations of the Supreme Court in the cases of Prithvi Insurance Co. Ltd. [1967] 63 ITR 632, Produce Exchange Corporation Ltd. [1970] 77 ITR 739 and B. R. Ltd. [1978] 113 ITR 647, it would clearly follow that the nature of the lines of business is not relevant but what is of importance is the unity of control and interlacing of the two businesses. In Standard Refinery and Distillery Ltd. v. CIT [1971] 79 ITR 589 (SC), the assessee-company owned a distillery and had acquired a sugar refinery. During the period in question the assessee also purchased and sold shares of a sugar and gur refining company and had suffer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that case that : "It was for the appellants to establish that different ventures constitute parts of the same business. There is in this case no evidence about unity of control and management, or interrelation of the business, or employment of the same staff to run the business, or the possibility of one theatre being closed without affecting the rest of the business." In the present case, however, the finding of fact arrived at by the Tribunal, on the basis of evidence on record, is that the management of the new business and the earlier business was the same and there was also unity of control and a common fund. Shri Rajendra submits that this finding is without any basis. But the Department has not challenged the correctness of this finding. The assessee, as noted by the Income-tax Officer, is engaged in the manufacture of various commodities like sugar, vanaspati, soaps, paints and varnish, torch, lantern, etc. All that the assessee did now was to start manufacturing a new commodity. In a larger sense the business of the assessee remained the same, viz., the business of manufacture. It was already manufacturing diverse items and a new item was added to this business. The fact ..... X X X X Extracts X X X X X X X X Extracts X X X X
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