TaxTMI 
TaxTMI 
1972 (1) TMI 6
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....er. It had several subsidiaries. The two subsidiaries with which we are concerned are : (1) Ruttonjee & Co. Ltd., Calcutta, and (2) Darlco Cannings Ltd., Bangalore. The business of Ruttonjee & Co. Ltd. was the same as that of the assessee company. Darlco Cannings Ltd. was carrying on the business of fruit processing and canning. The said subsidiaries had running accounts with the assessee-company. The balance-sheets of the assessee-company for the relevant years showed funds due by the subsidiary companies to the assessee-company and also the funds due to the subsidiary companies by the assessee-company. The assessee-company neither charged interest to subsidiaries on the funds due to it nor paid any interest on the funds due by it. The assessee-company had borrowed funds from outsiders on which it had paid interest from year to year. The Income-tax Officer took the view that since interest was not charged by the assessee-company on the advances made to its subsidiaries but interest was paid by the assessee- company on its borrowings, part of the interest paid on its borrowings was for non-business purposes and interest attributable for non-business purposes was not admissible as d....
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....his business, nor does it make the company his agents for the carrying on of the business. That proposition is just as true if the shareholder is itself a limited company. It is also well-settled that there may be such an arrangement between the shareholders and a company as will constitute the company the shareholders' agent for the purpose of carrying on the business and make the business the business of the shareholders. It is, therefore, a question of fact in each case to be decided whether the subsidiary was carrying on the business as the company's business or as its own. The business of a subsidiary company can be regarded as the business of the parent-company if in addition to the capitalist control, it has " functional control " over its subsidiary. The leading case on this question is Odhams Press Ltd. v. [1940] 23 T. C. 233 ; [1941] 9 I.T.R. (Supp.) 92, 109, 106 (H. L.). The facts were these : Odhams Press Ltd. was a company which carried on the business of printing and publishing a number of papers and periodicals ; it had a number of wholly controlled subsidiaries and one of those subsidiary companies was a company called Coming Fashions Ltd. The holding compa....
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....e paper merchants, the directors of both companies being the same and getting their remuneration exclusively from the parent. The subsidiary had no staff of its own except a manager who had no access to the books which were kept by the parent. No dividend was ever declared by the subsidiary, its profits were simply treated as those of the parent. The premises on which the subsidiary company's business was carried on was owned by the parent and let at a nominal rent to the subsidiary on a yearly tenancy. The Corporation of Birmingham intended to purchase these premises under their compulsory powers, and the question arose whether the parent or the subsidiary was the proper party to claim compensation for disturbance of the business. In the latter case the Corporation of Birmingham would have escaped payment altogether because by section 121 of the Lands Clauses Consolidation Act, 1845, no compensation is payable to an occupier whose tenancy does not exceed one year. The parent-company argued : (1) that their business " embodies their subsidiary company " and that the subsidiary " carried on its trade as a separate department of " the parent so that the rent was " an interdepartm....
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....e, the Tribunal found the following facts : (1) that the business of the assessee-company is to run a brewery and manufacture beer, as specified in clause 3(b) of its memorandum of association ; (2) that the objects-clause 3(C-2) as amended in December, 1957, also refers to processing and canning of fruits and other culinary products ; (3) that its memorandum of association authorises the assessee-company to promote any other company for any purpose which may seem directly or indirectly calculated to benefit the assessee-company ; (4) that clause 3(t) authorises the assessee-company to lend money to any person ; (5) that pursuant to the above mentioned objects, the assessee-company has acquired the controlling interest in its subsidiaries, the business of one of which, viz., Ruttonjee & Co. Ltd., is the same as that of the assessee- company ; and (6) that the purpose of the other subsidiary, viz., Darlco Cannings Ltd., is also one specified in the assessee's memorandum of association. From the above facts, the Tribunal concluded that the assessee-company carried on its business through the agency or medium of subsidiaries and expanding its activities through subsid....