TMI Blog2017 (11) TMI 1662X X X X Extracts X X X X X X X X Extracts X X X X ..... g activities the assessee were closed, the factory was locked and was taken over by RFC in July 1991? (ii) Whether the tribunal was legally justified in allowing the set off of brought forward losses against the income earned from commission activities treating it to be the same business? (iii) Whether the tribunal was legally justified in allowing set off of the carried forward business losses by holding that there is a common management, administration, organization, funds, employees and unity of control thus there is a interlacing, interdependence and interconnection between the manufacturing, trading and commission activity of the assessee, merely on the basis of written submissions specifically when the assessee failed to substantiate its claim by way of documentary evidences during the set aside assessment/Appellate proceedings? (iv) Whether the tribunal was legally justified in allowing the set off of business loss when for the immediately preceding year i.e. AY 1993- 94 the Assessing Officer disallowed the set off of brought forward business loss which was confirmed by the CIT(A) and no appeal was preferred by the assessee before the tribunal? 3. The fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of M/s. Khaitan Chemicals Ltd. To earn commission income, it had not employed any additional work force and no development of additional funds. The balance sheet was signed in all the years by Sh. I.P. Khaitan and Smt. Kiran Khaitan in all the relevant years and that there is no change in share holding. That funds of one activity were utilized for other activities. That the manager and other staff of the company who were looking after the manufacturing and commission activity were same during the earlier assessment years. To look into the set aside issue, the assessee s AIR was asked to specifically produce minutes books of the company and loan agreements from the bank for loans taken and documents of the subsidy received. The assessee s AIR vide his reply dt. 16.11.06 submitted that the issues set aside do not require production of minutes book and he did not produce the same. The minutes book was required to see that regarding the various activities of the assessee, who took all the decisions. It would have also shown that who was entrusted the job of carrying out the various activities at the managerial level. This would have provided insight that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort of the same. On the basis of the above discussion, it can be deducted that the assessee s A/R merely submitted written submission in support of his claim for common fund, common form of organization, common management and unity of control. No proof or evidence or details asked for by this office were produced in support of the claim of the assessee in the set-aside proceedings. These issues were discussed before the ld. CIT(A) and Hon ble ITAT also. The Hon ble ITAT set aside the matter to the file of the Assessing Officer to verify from records the substance in the claim of the assessee. As discussed above the assessee has failed to prove the same. Moreover, assessee did not prefer second appeal against the first appellate order denying the similar claim in the A.Y. 1993-94. Therefore, it is deduced that the assessee does not have common fund, common form of organization, common management and unity of control and hence, no interconnection, inter-locking and interdependence between the two activities of the company. 5. However, the CIT(A) has observed as under:- (c) Now coming on the merit of the case, the arguments of the counsel carries much substance in regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng thereto even information sought at the time of set-aside proceedings, the ld. AO has not examined the information available on record regarding common management, common funds and unity of control. The facts stated in para number 17 are very vital piece of information in order to determine the issue of unity of control and management, employment of same capital, common funds, common employees as laid down by the apex court in the case of Setab Gunj Sugar Mills v/s Commissioner of Income- Tax 41 ITR 72 (SC) as relied upon by the learned counsel. These information goes to establish in an unequivocal terms that there is a common management, unity of control, common funds, common place of business, common set of books of accunts, common organization and common administration and thus there is a interdependence, interlacing and interconnection between the activities carried on by the assessee company. The facts of the case of CIT v/s SM Ahmed Hussain s case 164 ITR 525 (Mad) (para number 26.a supra) squarely applies to the case in hand, wherein distribution of cinema films and purchase and sale of national Defence Remittance Scheme certificate were being carried on by the assessee. A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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