TMI Blog1980 (8) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... of cloth and manufacturing of chemicals and dyes and that the appellant was not entitled to deduction of bad debts of Rs. 34,617 (Rs. 18,772 relating to machinery department and Rs. 15,845 relating to steel rolling mill) against the income of the assessee for the assessment year 1967-68 ? (3) Whether, on the facts and in the circumstances of the case, the assessee was entitled to the capital loss of Rs. 47,381 in the year of account ? " At the hearing of the reference, it was stated on behalf of the assessee that the third question set out above is not pressed. It is, therefore, not necessary to consider the said question and to set out the facts bearing on the said question. The assessee is a private limited company. The assessment year is 1967-68, the previous year being the financial year ended March 31, 1967. The assessee was carrying on different business activities at different points of time and the following table gives a brief summary of those activities : -------------------------------------------------------------------------------------------------------------------------------------------- Nature of business activity Period --------------------------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the staff was not interchangeable ; (iv) inter se transactions between the various businesses were separately and meticulously recorded; (v) the closure of one business was not shown to have affected the other businesses-in fact, out of five different businesses, three had closed down without affecting the remaining two businesses which were still functioning; (vi) different books of account were maintained for each business and separate profit and loss account and balance-sheet were prepared in respect of each business although ultimately the accounts were consolidated into a common account ; (vii) the overall control of the board of directors over all the businesses, common ownership of the various businesses, common source of finance, consolidation of accounts and common assessment proceedings in different years were factors of no material importance; (viii) even in the case of a limited company, there can be different businesses, although overall control is retained by the same board of directors. The question as to what constitutes " same business " has been considered in several decisions. We shall, however, briefly refer only to some of the leading decisions on the sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question which arose was whether the assessee could carry forward that loss and set it off against the income from sugar manufacturing and distillery for the subsequent year. The question had to be examined in the light of the provisions of s. 24(2) of the Indian I.T. Act, 1922. It was held that the share transaction as well as the other businesses of the company were dealt with by a common management, common business organisation, common administration, common fund and common place of business and that the businesses were, therefore, the same. In arriving at this decision, the following facts found by the Tribunal were relied upon ; (a) that there was a single trading and profit and loss account ; (b) that the share transactions as well as the business had been dealt with by a common organisation and the business of the company as well as the transactions relating to the shares were, attended to as part and parcel of the assessee-company ; (c) that a common fund was utilised for both business purposes as well as for the purchase of shares; and (d) that the share transaction work as well as the other business of the assessee-company were carried on in the same place of business. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... control and dovetailing or interlacing between the business of import and the business of export carried on by the assessee and that they constituted the same business. In CIT v. Alembic Glass Industries Ltd. [1976] 103 ITR 715 (Guj), the assessee-company had an existing unit manufacturing glass at Baroda. For establishing a new glass manufacturing unit at Bangalore, the company incurred certain expenditure in the relevant years. The said unit did not go into production during the years in question. During the course of the assessee's assessment to income-tax, the ITO, inter alia, held that the Bangalore unit was not a branch of the assessee's factory and that it was, therefore, a new business and since that new business had not started production, the payment of interest on the borrowings made for incurring the expenditure for setting up the new unit could not be allowed as revenue expenditure. On the same ground, he also disallowed some miscellaneous expenditure and travelling expenditure referable to the establishment of the Bangalore unit. This decision was reversed on appeal by the AAC who held that the Bangalore unit did not become a distinct business undertaking although i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontrol was exercised at the registered office of the assessee-company and that circumstance also, therefore, did not detract from the unity of control. The emphasis on the widely different nature of the business activities, though not altogether irrelevant, is not by itself decisive. The fact that manufacturing business was combined with trading activities is again a matter of no consequence because that by itself, or coupled with the other circumstances present herein, cannot lead to the conclusion that there was no interlacing or interdependence, since there was unity of control. Even if different books of account were maintained and the transactions inter se between the different business units were recorded in those books of account, once it is found that ultimately there was a common profit and loss account and balance-sheet, that circumstance would pale into insignificance because such a method of accounting would be more for convenience of business than for the purpose of maintaining the different identities. The fact that the closure of one business did not affect or lead to the closure of the other businesses is also not of much consequence because no decisive inference ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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