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December 2016

22. Business expenditure – A. Y. 1999-00 – Same business or different business – tests – Expenditure incurred in setting up new line of same business is deductible

By K. B. BHUJLE, Advocate
Reading Time 1 mins

CIT vs. Max India Ltd. (No.1); 388 ITR 74
(P&H):

For the A. Y. 1999-00, the Assessing Officer
made disallowance of Rs. 6,70,78,483/- on account of expenses for setting up
new business. The Commissioner (Appeals) and the Tribunal allowed the
deduction.

On appeal by the Revenue, the Punjab and
Haryana High Court upheld the decision of the Tribunal and held as under:

“i)  While determining whether
two or more lines of businesses of the assessee are the same “business” or
“different businesses” regard must be had to the common management of the main
business and other lines of businesses, unity of trading organization, common
employees, common administration, a common fund and a common place of business.
For evaluating the “same business”, the test of unity of control and the nature
of business is to be applied.

ii)  The Commissioner (Appeals)
after appreciating the evidence produced on record had observed that various
businesses carried on by the assessee including health care constituted the
same business of the assessee. The Appellate Tribunal was right in law in
allowing the expenses in setting up new business of Rs. 6,70,78,483 treating it
as revenue in nature.”

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