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Commissioner of Income-tax Vs. Indian Telephone Industries Ltd. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKarnataka High Court
Decided On
Case NumberIncome-tax Refernce Case No. 265 of 1978
Judge
Reported in[1989]175ITR215(KAR); [1989]175ITR215(Karn)
ActsIncome Tax Act, 1961 - Sections 37
AppellantCommissioner of Income-tax
RespondentIndian Telephone Industries Ltd.
Appellant AdvocateK. Srinivasan and ;H. Raghavendra Rao, Advs.
Respondent AdvocateG. Sarangan, Adv.
Excerpt:
- section 2a: [subhash b. adi, j] denial of gratuity for the break in service period held, the act being a social legislation and social security for an employee after retirement, resignation, whenever he becomes eligible and being a beneficial legislation, compliance with requirement under section 2-a is mandatory. sub-section 91) of section 2-a provides for treating the absence as break in service. however, such break in service must be evidenced by an order in accordance with the standing order, rules or regulations governing the employees of the establishment. no doubt sub-section (2) of section 2-a requires that, employee to work not less than 240 days in a year to avail the benefit of gratuity for the said year. however, if the management wants to treat any period of service as..........as expansion of the existing business at bangalore ?' 2. the assesses-company had established a unit at naini and for the assessment year 1970-71, it claimed deduction in respect of certain sum as revenue expenditure incurred in that establishment. the income-tax officer and the appellate assistant commissioner rejected that claim while the tribunal allowed it, recording a finding as follows : 'the two factories belonged to the indian telephone industries, bangalore, and for all practical purposes, it was an expansion of the business of the existing unit of the factory. the overall control of the business of the two factories at naini was conducted from indian telephone industries ltd., bangalore. the production of these two units would be the production of indian telephone industries.....
Judgment:

Jagannatha Shetty, J.

1. The question referred under section 256(1) of the Income-tax Act, 1961, by the Income-tax Appellate Tribunal, Bangalore Bench, is as follows :

'Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in law in holding that the Naini factory did not constitute a new business but as expansion of the existing business at Bangalore ?'

2. The assesses-company had established a unit at Naini and for the assessment year 1970-71, it claimed deduction in respect of certain sum as revenue expenditure incurred in that establishment. The Income-tax Officer and the Appellate Assistant Commissioner rejected that claim while the Tribunal allowed it, recording a finding as follows :

'The two factories belonged to the Indian Telephone Industries, Bangalore, and for all practical purposes, it was an expansion of the business of the existing unit of the factory. The overall control of the business of the two factories at Naini was conducted from Indian Telephone Industries Ltd., Bangalore. The production of these two units would be the production of Indian Telephone Industries Ltd. with headquarters at Bangalore only. Looking to all these facts, in our opinion, the factories are nothing but a branch of the assessee even though for purposes of relief as a new industrial undertaking, it can be treated as separate units, but it cannot be said that it was a new business altogether. The expenditure claimed by the assessee would, therefore, be allowable as revenue expenses. We, therefore, reverse the orders of the authorities below in this regard and direct the allowance of the expenses claimed in toto.'

3. It will be seen from the above finding recorded by the Tribunal that the establishment at Naini is not an independent unit but just an expansion of the existing business.

4. In view of this finding of fact, we answer the question in the affirmative and in favour of the assessee.


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