9911796707
TMI Blog1971 (7) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... st 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 technical and business matters, export market expenditure for the work done for the subsidiary companies. The expenses so incurred are recovered by the parent-company in proportion to the paid-up capital of the subsidiary companies. The dispute in the prese ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny 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 have entrusted the parent-company with their function, in London and have evolved a formula for apportioning the expenses incurred by the parent-company. It is clear from all this that the disputed amount is the assessee-company's contribution to the parent-compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 appellants, but, as the Master of the Rolls points out, the two companies are separate taxable persons. The trade or business of one company, even though it may affect very closely the trade or business of, another, is not the same as that other's trade or business. Rule 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 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 addition to the amounts advanced, the appellants were owed by the company at the 31st December, 1933, a sum of pound 10,118 on trading accounts representing charges for, work done at full trade prices. For the trading year ending the 31st December, 1933, Coming Fashions Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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