Indian Kanoon - Search engine for Indian Law

The assessee was a public limited company engaged in the manufacture of chemicals, salt and detergents in its factories. One of such manufacturing units was in Gujarat. Subsequently, it set up a subsidiary fertilizer company but this subsidiary company amalgamated with the respondent under the order of the High Court passed on a company application on 7th Sept., 1989. The respondent thereafter set up a fertilizer plant in the State of UP. Certain deductions were claimed by the respondent for the asst. yr.. 1992-93. The AO disallowed some of the deductions claimed, particularly those under Section 36(1)(iii). The AO and the CIT(A) had come to the conclusion that this fertilizer unit would have to be treated as a separate unit and, therefore, the benefit under Section 36(1)(iii) could not be extended to the respondent as far as any amount of interest paid in respect of the capital borrowed for the business of the fertilizer unit was concerned. The Tribunal considered various factors such as administration of various units, flow of funds, unity of management, unity of the accounting set up as well as control coupled with various such relevant factors. The Tribunal found that the administration and management of funds of the two units were common. The Tribunal had also recorded findings of fact that there was a functional integrity between the two units. It was in these circumstances that the deduction under the particular section was held allowable.