TMI Blog1989 (11) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... vitiated by failure to consider the relevant evidence and material facts ? 2. Whether, on the facts and in the circumstances of the case, the payment of retrenchment compensation is allowable as a deduction under section 37 of the Income-tax Act, 1961 ?" The respondent, an individual, is an assessee to income-tax. We are concerned with the assessment year 1975-76. The previous year ended on March 31, 1975. The assessee was mainly dealing in oil and oil seeds as well as commission agency in those goods. He was also running an oil mill in a different locality in the same town. The oil mills was closed. The assessee had to pay a sum of Rs. 20,850 as retrenchment compensation to the employees. It was claimed as a deduction in the computatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... came from the head office. It was further observed that the only credit item in the balance-sheet on the liabilities side is the dues to the head office, that the oil mill has no independent bank account and no loans are shown as payable by the oil mill and, in the circumstances, there was complete interlacing and interlocking of funds apart from unity of control. In the light of the tests laid down in the decision of the Supreme Court mentioned above, the oil mill was found to be only a branch and not a separate business. Holding that the business is one and the same and that the requirements of business necessitated the closing down of the oil mill, the Appellate Tribunal held that the payment of retrenchment compensation, necessitated on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature of the two lines of business. The earlier decisions of the Supreme Court had also approved of the tests based on interconnection, interlacing and interdependence. Although the points made out by the Commissioner have relevance in deciding the issue, they are not conclusive. The control is exercised through provision of finance. We find that the entire requirements of finance for the oil mill has to come from the head office. In fact, the only credit item in the balance-sheet on the liabilities side is the dues to the head office. The oil mill has no independent bank account. No loans are shown as payable by the oil mill. This shows that the finances are centralised and the requirements of finance by the oil mill are met by drawing f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is plea is without force. The question that arose before the Supreme Court was whether the two firms consisting of identical partners carrying on two businesses had to be treated as business of a single partnership firm. The Supreme Court adverted to the decisions of the various High Courts wherein the said question came up for consideration, and held that the various decisions of the High Courts proceeded on the basis that, for the purposes of income-tax law, each partnership firm must be regarded as an assessable entity, separate and distinct from its partners, and the approach proceeded upon a conceptual perspective of the tax law. Holding that the above approach adopted by the High Courts is not sound, the Supreme Court held that the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question whether different businesses carried on at different points of time constitute one business or separate business came up for consideration before the Supreme Court in B. R. Ltd.'s case [1978] 113 ITR 647. After referring to the earlier decisions of the Supreme Court and the principles laid down in English decisions, the court held that a common management, a common business Organisation, a common administration, a common fund and a common place of business showed in the said case the interlacing and interdependence of the businesses carried on by the assessee. The court also laid emphasis on the unity of control and certain other circumstances adverted to by it in the judgment, and held that there was dovetailing or interlacing be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses and there was separate staff for one of them, which was not inter-transferable, the Gujarat High Court held that the unity of control was not affected since there was a common management and administration in view of the overall control of the various businesses. (See Bansidhar Pvt. Ltd. v. CIT [1981] 127 ITR 65 (Guj), at p. 73). By parity of reasoning, we are of the view that the provision in the agreement that the assessee would retake the workers if, for any reason, the oil mill was restarted, is of no consequence, in view of the fact that there was unity of control in the nature of the two lines of business. In the light of our above reasoning, we are of the view that the Appellate Tribunal was justified in holding that the oil mi ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
