TMI Blog2009 (1) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... jpal and Ms. Anshul Sharma. Respondents - Mr.S.K. Aggarwal. We have heard arguments of learned counsel for the parties in some detail. On behalf of the Revenue Ms. Prem Lata Bansal presses that several questions of law arise which warrant a consideration of the present Appeal. The Revenue in its Appeal has thus proposed the following questions of law:- (i) Whether ITAT was correct in law in allowing deduction of Rs 8,71,20,781/- to the assessee being retrenchment compensation paid by the assessee to the employees of DCM Unit situated at Bara Hindu Rao on its closure on 01.04.1989? (ii) Whether ITAT was correct in law in allowing the deduction of retrenchment compensation, which was incurred by the assessee not for the pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded before us that as regards the first five questions the outcome of the appeal depends completely, and that with regard to questions (vi) and (vii) partially, upon the view that this Court would take with respect to the conclusion arrived at by the Tribunal that the business of the assessee had not closed down. In support of her submissions she adverted to the Assessment Order. 3. We find that not only the Commissioner of Income Tax Appeals [hereinafter referred to as in short as "CIT(A)"] but also the Tribunal has considered the matter in some detail and returned a finding of fact in paragraph 85 and 86 of the impugned judgment. Briefly, the Tribunal has held that it is not disputed that the Assessee had several businesses like manufa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he impugned judgment. It is specifically noted that the assessee prepared a consolidated Profit and Loss account and Balance Sheet of all its manufacturing units taken together; the control and management of the assessee was centralized in the Head Office, and also, the fact that all important policy decisions were taken at the head Office. The Tribunal also noted the fact that the Head Office provided funds required for various units and that there were common marketing facilities for all textile units. The Tribunal upon application of the tests laid down by the Supreme Court in the case of CIT vs Prithvi Insurance Co; (1967) 63 ITR 638 and Produce Exchange Corporation Ltd vs CIT; 77 ITR 739 (SC), came to the conclusion that there was in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "). It was contended that the deduction claimed by the Assessee could not be allowed in view of the provisions of Section 14A of the Act which provides that only that expenditure can be allowed as deduction which is incurred by the assessee in relation to income which forms part of the total income under the Act. Since the income from securities was exempt under Section 10(25) of the Act and was not included in computing the total income of the assessee, the expenditure incurred could not be claimed as deduction by the assessee. She further contended that the deduction could also not be claimed as it was an expense connected to the closure of DCM mill unit which was a separate and distinct business from that of the other 3 units. Accordin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner by a letter dated 19.04.1989 granted the said permission with a caveat that in the event of any deficiency on sale of securities the burden would have to be borne by the Assessee, in order to ensure that the employees would get the rate of interest equivalent to the rate paid by the Central Government. Undoubtedly there was a loss on sale of security. The Assessee in order to ensure that the employees, in accordance with the approval granted by the RPF Commissioner, would be paid a rate of interest equivalent to that paid by the Central Government, incurred an expenditure of Rs 1,80,20,261/-. 7. A bare reading of the aforementioned undisputed facts would show that this was an expense incurred by the Assessee towards its empl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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