TMI Blog1974 (2) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... e incurred an expenditure of Rs. 38,450 on account of this loan. This amount included Rs. 11,621 paid to the Corporation as interest, Rs. 1,850 on account of commitment levy, Rs. 16,852 on account of cost of stamp, Rs.7,561 on account of registration charges and Rs. 564 on account of legal charges. The question was whether the expenditure of Rs. 38,450 was deductible under section 37 of the Income-tax Act, 1961, as an expenditure laid out wholly and exclusively for the purpose of business. The Income-tax Officer disallowed the claim. He held that this was an expenditure incurred for setting up a new business and not for one which was already in existence. This expenditure cannot hence be allowed out of the profits earned by the textile busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l has referred the following question of law for the opinion of this court: "Whether, on the facts and in the circumstances of the case, the amount of Rs. 38,450 was allowable as a deduction in determining the business profits of the assessee-company for the assessment year 1966-67 ?" The admitted position is that the memorandum of association of the assessee-company specifically states that one of the objects of the company is to manufacture straw-board, mill board, pulp board, coir-washers and to sell the same. The straw-board factory was set up by the assessee by utilising its existing surplus funds and borrowals from the Financial Corporation. The borrowings from the Financial Corporation were specifically for the purpose of setti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. It was found that there was complete unity of control and shares were one of a number of commodities in which the company dealt in the ordinary course of business and that there was no element of diversity or distinction or separateness about the transaction in shares. The Supreme Court held that the decisive test was unity of control and not the nature of the two lines of business. Where the management was common, the trading organisation, the administration, the funds and the place of business were common, it cannot be said that the different ventures were different businesses carried on by the same company. The same view was reiterated in Standard Refinery and Distillery Ltd. v. Commissioner of Income-tax. Applying these settled princ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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