TMI Blog1984 (7) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... h the assessee and his wife are the only directors, leased out two units in Kerala to the said company. Clause 3 of the said agreement provided that the company should treat the services of the employees in these units as continuous without any break and that the terms and conditions of service of the employees shall not in any way be less favourable to them. The said clause further provided that the company will be liable to pay the retrenched employees retrenchment compensation as if their services under the company continued uninterruptedly. The two other units in Kerala, which the assessee was holding under lease, were surrendered before the expiry of the period. By a further agreement (annexure B) dated November 21, 1970, clause 3 in annexure A was modified and after modification it read that in the event of the retrenchment of the employees, compensation on the basis that the employees continued to be in the service of the assessee up to October 1969, will be paid by him. The assessee and the employees settled their disputes as per the memorandum of settlement dated November 21, 1970 (annexure C). The clauses in the said agreement in regard to payment of compensation, etc., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t which " the assessee had to make by way of commercial expediency for the industrial health of the business as a whole." In the petition filed by the Revenue under s. 256(1) of the Act, six questions had been raised. The Tribunal, however, referred only the following question to this court Whether, on the facts and in the circumstances of the case, the assessee is entitled to claim deduction of Rs. 4,18,107 under section 37 of the Income-tax Act? " Regarding the other five questions, the Tribunal held as follows: " In the reference application the only issue questioned by the Commissioner of Income-tax is the decision that the assessee is entitled to this deduction. But this issue had been split up into six questions. We think the issue being whether the assessee is entitled to the deduction, that is the only question which could be referred. " LAW STATED It is a well established principle of income-tax law that the outgoings of a business are chargeable only against the income of that business which the assessee carried on in the previous year. Similarly, if an assessee carries on several distinct and independent businesses and if one of them is closed down in the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ether different ventures may be said to constitute the same business it has to be seen whether there was any interconnection, any interlacing, any " interdependence, any unity embracing the ventures, and whether the different ventures were so interlaced and so dovetailed into each other as to make them into the same business. These principles have to be applied to the facts before a legal inference can be drawn that different business ventures constitute one business. In the determination of the question, findings of fact are involved, because a variety of matters bearing on the unity of the business have to be investigated, such as unity of control and management, conduct of the business through the same agency, the interrelation of the business, the employment of the same staff to run the business, the nature of the different transactions, the possibility of one being closed without affecting the texture of the other and so forth. " Having expounded the law thus, the counsel for the Revenue called our attention to the peculiar facts of the case. He submitted that the materials and evidence already on record would establish that the ventures carried on by the assessee in the ten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kers before the District Labour Officer, Quilon, and the compromise arrived at on November 21, 1970, it is agreed as follows Messrs. Pratap Cashew Company (Private) Limited shall be liable to pay the employees in the event of their retrenchment, compensation on the basis that their service was continuous from October, 1969, only. Any liability up to October, 1969, shall be discharged by Shri K. Ravindranathan Nair, Vijayalakshmi Cashew Company, Quilon. Clause 3 of the agreement dated March 9, 1970, shall stand amended to this extent. Clauses 1 and 4 of annexure C read : " 1. The management agrees to pay the workmen, excluding the staff, five days' wages per year of service in full and final settlement of all their claims for past services till October, 1969 . ...... 4. It is agreed that the workers will have no claim against M/s. Pratap Cashew Co. Private Ltd. with respect to the claims settled by this agreement and that the notices given to the unions and the workers to the contrary will stand cancelled. " He also referred us to a decision of this court in CIT v. Pratap Cashew Co. P. Ltd. [1979] 116 ITR 733, where this court had occasion to consider the character of anne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counsel for the assessee. He submitted that inasmuch as the Revenue accepted the order of the Tribunal rejecting its application under s. 256(1) of the Act seeking reference of the question challenging the finding of fact, namely " Whether, on the facts and in the circumstances of the case, the Tribunal is right in law and fact in drawing an inference, without entering a positive finding that these units are one business only and is not the above 'finding' wrong, unreasonable and without materials ? " The Revenue, under law, was estopped from challenging the said finding before us in these proceedings. He submitted that the said finding, in the circumstances, is binding upon this court. In support of this contention he relied on the decision of the Supreme Court in Aluminium Corporation of India Ltd. v. CIT [1972] 86 ITR 11. The Supreme Court has stated thus (p. 13): " If any party wants to challenge the correctness of the findings given by the Tribunal either on the ground that the same is not supported by any evidence on record or is based on irrelevant or inadmissible evidence or is unreasonable or perverse, a question raising any one of those grounds must be sought for an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainst the income from units other than those four units where he had closed down the businesses either due to the surrender of the lease or due to transfer as per annexure A. An erroneous approach to the issue is a misdirection in law. A finding arrived at in such circumstances can not be treated as a finding of fact " which should bind this court in its decision". In Mahesh Anantrai Pattani v. CIT [1961] 41 ITR 481, the Supreme Court has held thus (p. 485): " It appears to us that the Tribunal was in error in treating the document of December 27, 1950, as a contemporaneous document and because of this erroneous approach, the finding that it has given cannot be treated as finding of fact which should bind the court in its decision. "(emphasis supplied) Finding it difficult to grapple with this problem, the learned counsel for the assessee submitted that the matter should then be remitted to the Tribunal for a de novo consideration of the facts without answering the question. In support of this contention, he cited Raghunath Prasad Poddar v. CIT [1973] 90 ITR 140 (SC). In that case the Supreme Court found that: " Neither the Income-tax Officer nor the Appellate Assistant Commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on referred to it, it is necessary to have additional material included in the statement of the case, the High Court can make an appropriate direction in that behalf. If the High Court is satisfied that some alterations should be made in the statement of the case to enable it to determine the question satisfactorily, it can make an appropriate direction in that behalf. The question is whether in issuing appropriate directions under section 66(4), the High Court can ask the Tribunal to travel outside the record and call for and collect material which is not already produced on the record. If section 66(4) is read along with section 66(1) and section 66(2), it may tend to show that the power of the High Court is limited to requiring the Tribunal to add to or alter the I statement of the case in the light of the material and evidence already on the record. If the question that can be raised under section 66(1) and section 66(2) can arise only out of the order of the Tribunal and if the statement of the case required to be drawn up by the Tribunal under the said two provisions would inevitably be confined to the facts and material already on the record, it seems unlikely that section 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd, therefore, the company did not carry on business at all, in my opinion they came to that conclusion by a wrong appreciation in law of the effect of the document before them ". (emphasis supplied) It is necessary to note in this context the law declared by the Supreme Court also. In Makesh Anantrai's Case [1961] 41 ITR 481, the Supreme Court has stated thus (p. 485) : "...... because of this erroneous approach the finding that it (Tribunal) has given cannot be treated as a finding of fact which should bind the court in its decision ".(emphasis supplied) To meet the argument of the counsel for the Revenue that the deduction of Rs. 4,18,107 claimed by the assessee falls under s. 25-FF of the Industrial Disputes Act and, hence, covered by Gemini Cashew's case [1967] 65 ITR 643 (SC), the learned counsel for the assessee referred to a decision of the Supreme Court in Sassoon J. David Co. P. Ltd. v. CIT [1979] 118 ITR 261, and submitted that the compensation paid must be held to be for the purpose of the business or in the course of the business. According to the assessee, the agreement, annexure A, as modified by annexure B and also clauses in the settlement between him and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could consider the correctness of the said finding, for, it is but another aspect of the main question. If such a question is only another aspect of the matter covered by the question that is referred to us, we have jurisdiction to consider that question covering another aspect of the referred question while answering the question before us. This court in Malabar Co-operative Central Bank Ltd.'s case, I.L.R. 1974 (1) Kerala 122, has held thus: It is no doubt true that a finding entered by the Tribunal on question of fact is final unless in extraordinary circumstances as when the finding was entered without material or was otherwise arbitrary or perverse and the very finding was questioned before us in the reference to this court. It is equally true that if the question referred comprehends other questions so that the other questions formed aspects of the question referred, this court is entitled to go into the matter of the other aspects in answering the question referred. On the facts and in the circumstances of the case, we find it difficult to say that what has been said by the Tribunal in the paragraph that we have extracted above from its order is finding on a question of fa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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