Deductibility of expenses from a closed business turns on proof of one integrated business, not separate independent ventures.

Deductibility under section 10(1) of the Indian Income-tax Act, 1922 depends on whether the expenditure relates to a business carried on in the relevant previous year. If a business has already been discontinued, an outgoing attributable to that closed unit cannot be set off against the income of separate businesses unless the assessee proves that all ventures formed one integrated business. In assessing unity of business, the relevant factors include common control and management, interconnection, interlacing, interdependence, common staff, and whether one unit can be closed without affecting the others. On the facts described, the cinema theatres operated independently with separate books, so the closed theatre was not part of a composite undertaking and the deduction was not allowable.

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Issues: Whether the amount of mesne profits attributable to the closed cinema theatre business was allowable as a deduction in computing business income for the relevant assessment year.

Analysis: Section 10(1) of the Indian Income-tax Act, 1922 allows deductions only in relation to a business carried on in the relevant previous year. If a business has been discontinued before the accounting year, no outgoing attributable to that closed business can be set off against the income of other distinct businesses. Whether several ventures constitute one business depends on the facts, including unity of control and management, interconnection, interlacing, interdependence, common staff, and whether one venture can be closed without affecting the others. On the facts found, the cinema theatres were run independently with separate books, and there was no material to show unity of business or that the closed theatre formed part of a general composite undertaking.

Conclusion: The deduction was not allowable; the assessee failed to prove that the Prakash Talkies venture was part of one integrated business carried on in the relevant year.

Ratio Decidendi: A loss or outgoing attributable to a discontinued and independent business cannot be deducted against the income of other businesses unless the assessee proves that all ventures formed one integrated business.

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