TaxTMI 
TaxTMI 
2006 (2) TMI 82
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....of the Commissioner of Income-tax (Appeals) allowing the claim of the assessee for deduction of expenditure including retrenchment compensation paid to the employees of the manufacturing unit?" The few facts leading to these proceedings are as under: The assessee is engaged in the manufacture of refined oil and trading in various commodities. From the assessment year 1981-82 the assessee ceased its manufacturing activity but continued the trading activity in various commodities. The assessee paid retrenchment compensation to the employees who were employed in the manufacturing unit on their termination of service. The assessee claimed deduction of the amount incurred by way of retrenchment compensation. The Assessing Officer disallowe....
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.... rent and therefore when once the business is closed, the assessee was not entitled to deduction under section 37(1) of the Act. Learned counsel appearing for the respondent-assessee sought to support the impugned orders. Therefore, the short question that arises for consideration is, whether, in the facts and circumstances of the case, it can be said that the assessee had closed the business of manufacturing activity and is not continuing trading business, so as to disentitle himself from the deductions under section 37(1) of the Act? The law on the point is fairly well settled. The Supreme Court in the case of B.R. Ltd. v. V.P. Gupta, CIT [1978] 113 ITR 647 in a somewhat similar situation where the assessee was carrying on import bu....
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....Supreme Court in the case of CIT v. Vikram Cotton Mills Ltd. [1988] 169 ITR 597 dealing with the income received by letting out the mills on lease held that the yield of income by a commercial asset was the profit of the business irrespective of the manner in which that asset was exploited by the owner of the business and he was entitled to exploit it to the best advantage and he might do so either by using it himself personally or by letting it out to somebody else. It was pointed out that the view that in order to constitute business income, the commercial asset must at the time it was let out be in a condition to be used as a commercial asset by the assessee himself was not correct. Further it was held that it was a part of the normal ac....
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....ount paid towards compensation constitutes business expenditure. When the company or the firm continues to exist as a juristic entity and carries on business, merely because one line of business is stopped it does not amount to closure of business. The decisive test is unity of control and not the nature of the two lines of business. The essence of such matters is whether there is a common management, a common business organisation, a common administration, a common fund and a common place of business which show interlacing and interdependence of the business carried on by the assessee. If after stoppage of one line of business, that business is leased as a commercial asset and it yields income even by way of rent, in essence it is profit e....