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TMI Blog1991 (1) TMI 64X X X X Extracts X X X X X X X X Extracts X X X X ..... buses and carried on transport business under the name and style of Bagavathi Transport, as could be seen from the assessment order for the assessment year 1952-53 (annexure 'J' to the stated case), From annexure "L" to the stated case, it is seen that, in the accounts of the firm relating to cigar business, a folio had been set apart for Bagavathi Transport and, in the accounting period 1951-52, amounts from the cigar business had been utilised for purposes of the transport business. Some time in 1967, a fresh deed of partnership was entered into between R. M. Maruthai Naidu and his three sons and therein, the business of the partnership had been stated to be the purchase, sale and manufacture of cigars, scented tobacco and any other busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d over a period of years, yet as there were heavy drawings as well, the amount of drawings by the partners was determined at four lakhs of rupees and the interest payment attributable thereon to the extent of Rs. 50,000 was disallowed. Initiating proceedings under section 263 of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), the Commissioner took the view that the assessment order was prejudicial to the Revenue in that interest in respect of a defunct business had been allowed, as the transport business and the other businesses carried on by the firm were not integrated and inter-linked businesses, but were separate. Ultimately, the Commissioner directed the addition of Rs. 92,000 to the total income of the firm for the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its opinion : "Whether, on the facts and circumstances of the case, the Appellate Tribunal was right in law in holding that the interest paid on the capital borrowed for the transport business which has now been discontinued should be allowed on the ground that the transport business as well as the other businesses carried on by the assessee formed one single business ?" Initially, the business of the assessee was the manufacture and sale of scented tobacco and cigars. However, even during the accounting period relevant to the assessment year 1952-53, the firm had carried on transport business. That is clearly established by the assessment order for the assessment year 1952-53 enclosed as annexure 'J' to the stated case. Later, as seen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts found by the Tribunal, the conclusion arrived at that the transport business as well as the other businesses of the firm formed one business, cannot be taken exception to. We may also in this connection make a brief reference to three decisions of the Supreme Court laying down the principles applicable in cases of this kind. In CIT v. Prithvi Insurance Co. Ltd. [1967] 63 ITR 632, the assessee, a public limited company, carried on business in life and general insurance. For the assessment year 1951-52, the assessee claimed the benefit of carry forward of the loss from the previous year in respect of life insurance business against the profits of the general insurance business. The departmental authorities did not countenance this cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that, after the closure of one business, another may conveniently be carried on. Ultimately, the Supreme Court held that the life insurance and the general insurance business were carried on by the assessee without any distinction, with common administrative Organisation and expenses and that they would constitute the same business within the meaning of section 24(2) of the Indian Income-tax Act, 1922, entitling the assessee to set-off the unabsorbed loss in the life insurance business against the profits from the general insurance business. Again, in Produce Exchange Corporation Ltd. v. CIT [1970] 77 ITR 739, the Supreme Court reiterated the test for determining whether two lines of businesses constitute the same business or not. The asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther lines of business, unity of trading Organisation, common employees, common administration, a common fund and a common place of business, the Tribunal was right in holding that the share business and the other businesses carried on by the assessee constitute the same business. In Standard Refinery and Distillery Ltd. v. CIT [1971] 79 ITR 589, the Supreme Court referred to CIT v. Prithvi Insurance Co. Ltd. [1967] 63 ITR 632 (SC) and Produce Exchange Corporation Ltd. v. CIT [1970] 77 ITR 739 (SC) and observed that certain objective tests for finding out the existence of interconnection, interlacing, interdependence and unity between two or more businesses are furnished by the existence of common management, common business organisation, c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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