Ramanujam, J.
1. The following four questions have been referred to this court by the income-tax Appellate Tribunal, Madras, at the instance of the Revenue in T.C. Nos. 378 to 383 of 1978 :
'1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the entire managing agency commission payable by the assessee to M/s. Kothari & Sons (Agencies) Private Limited was an admissible deduction for the assessment years 1966-67 and 1967-68
2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in deleting the disallowances of proportionate sitting fees of Rs. 3,406 and Rs. 3,560 for the assessment years 1966-67 and 1967-68, respectively
3. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the entire managing agency commission payable by the assessee to M/s. Kothari and Sons (Agencies) Private Limited was an admissible deduction for the assessment years 1968-69 and 1969-70
4. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee was entitled to the deduction of a further sum of Rs. 3,24,718 for the assessment year 1968-69, and Rs. 3,56,660 for the assessment year 1969-70, towards head office expenses ?'
2. Not satisfied with the statement of the case referring the said questions, the Revenue required the following two questions to be referred by filing an application under s. 256(2) of the Act, and this court directed a reference on the following questions in T.C. Nos. 517 to 520 of 1981 :
'1. Whether, on the facts and in the circumstances the case, the Appellate Tribunal was correct in law in holing that the business carried on by the assessee in tea, coffee and fertilisers constituted a single and unitary business activity even while noting the fact that the assessee had maintained separate accounts for fertiliser unit for the purpose of obtaining relief under section 15(c) of the Indian Income-tax Act, 1922
2. Whether the Tribunal's conclusion that the assessee's business constituted a single and unitary business activity for the purpose of deduction of the managing agency commission is reasonable having regard to the facts of the case and based on valid materials ?'
3. The assessee-company is carrying on business of growing and selling tea. The income from tea was taxable to the extent of 40%, the remaining 60% being exempted as agricultural income. It also grew coffee and derived income therefrom by selling it to the coffee pool. The income from coffee was not taxable at all. In addition, the assessee manufactured and sold fertilisers. The income from the manufacture and sale of fertilisers is taxable. There was also income from other sources.
4. The assessee, for the assessment years 1966-67 to 1969-70, claimed deduction of the entire managing agency commission against the aggregate income of all the three businesses relating to tea, coffee and fertilisers. The ITO did not allow the assessee's claim (in full). The assessee took the matter in appeal. The AAC directed the allowance of the entire managing agency commission, following the decision of the Supreme Court in CIT v. Maharashtra Sugar Mills Ltd. : [1971]82ITR452(SC) . Aggrieved by the decision of the AAC, the Revenue appealed to the Tribunal, contending that since the assessee was carrying on three different and separate businesses, the managing agency commission referable to the business relating to tea and fertilisers alone could be deducted and that the managing agency commission referable to the business in coffee cannot be allowed as a deduction as all the three businesses have to be taken to be the same business. The Tribunal, after hearing the parties, passed an order of remand with a direction to the AAC to give a finding as to whether the three businesses were one and the same. The AAC submitted a remand report on March 31,1977, to the effect that the three businesses conducted by the assessee are different businesses and not the same. The Tribunal, after considering the report of the AAC, however, upheld the original order of the AAC allowing deduction of the entire managing agency commission in all the years. According to the Tribunal, there was unity of control as there was a common management, a common administration, a common fund and a common head office from which control over all units was exercised and, therefore, all the businesses should be taken to be so interconnected so as to treat them as a single business. Out of that portion of the order of the Tribunal which deals with the managing agency commission, question No. 1, referred to in T.Cs. Nos. 378 to 383 of 1978, and the two questions in T.Cs. Nos. 517 to 520 of 1981 arise.
5. For the same assessment years, the ITO had disallowed a proportionate amount of the sitting fees paid on the ground that the income from coffee was not taxable and, therefore, the proportionate amount of sitting fees referable to the business in coffee should be disallowed. The AAC, on appeal, allowed the deduction in its entirely. This was contested before the Tribunal by the Revenue. The Tribunal had held that since all the three businesses are one and entire, full allowance has to be granted towards sitting fees. In relation to this aspect, the Revenue has sought and obtained a reference on the second and third questions in T.Cs. Nos. 378 to 383 of 1978.
6. For some of the assessment years, the assessee originally claimed deduction in respect of head office expenses proportionate to the taxable income, but later claimed the full deduction of the head office expenses. The ITO allowed deduction under this head in proportion to the taxable income from tea and fertilisers. When the matter reached the Tribunal, the Tribunal held that the entire head office expenses is allowable as a deduction. As regards the said view of the Tribunal, the fourth question in T.Cs. Nos. 378 to 383 of 1978 has been referred.
7. The claim for deduction made by the assessee before the authorities in respect of the various years under the various heads are set out below :
----------------------------------------------------------------------Assessment year Managing agency Sitting fees Head officecommission expenses----------------------------------------------------------------------Rs. Rs. Rs.1966-67 2,35,473 3,406 -1967-68 1,14,515 3,560 -1968-69 - - 3,24,7181969-70 - - 3,56,660----------------------------------------------------------------------
8. Thus, the main question in all these tax cases is whether the business of producing tea and coffee and the business of manufacture of fertilisers carried on by the assessee during the relevant years constitute the same and single business or whether they are separate and independent businesses. The Tribunal, in this case, has proceeded on the basis that all the three businesses are one and the same and, therefore, full allowance has to be granted towards the managing agency commission, sitting fees and the head office expenses. In support of that view, the Tribunal has referred to the following facts as found by the AAC in his remand report.
9. Originally the assessee company was established as a public limited company, in 1943, under the name Blue Mountain Estates Ltd. with its registered office at Madras. It owned tea estates called Glendale, Brooklands, Colacumbic in Nilgiris District and Adderly Estate having tea and coffee in Nilgiris District. Thereafter, in 1949, it purchased a purely coffee estate in Mysore State called 'Santawally Estate' with an extent of about 1,000 acres, the purchase being made out of funds generated over the years. In 1956, the assessee again purchased another coffee estate called 'Santagherry Estate' in Mysore State. In 1962, the name of the assessee was changed to Blue Mountain Estate and Industries Ltd., because the company wanted to start a fertiliser factory at Ennore near Madras. The sales of both coffee and tea were effected through head office by giving instructions to the estate managers and the financial control of the tea and coffee estates was with the head office and accounts were rendered were rendered monthly by the estate was with the head office and accounts were rendered monthly by the estate managers to the head office. The amounts required for payment of weekly wages and for meeting other expenses of the estate were remitted from the head office once or twice in a month to enable the managers to incur the expenditure. The sale proceeds of both coffee and tea as received in the head office were credited to the same account with the State Bank of India. The remittances to both tea and coffee estates were also made from the State Bank of India account. Regarding the fertiliser business, the company made an investment of nearly Rs. 46 lakhs out of which Rs. 21 lakhs represented fresh capital raised and Rs. 25 lakhs were paid out of the existing funds of the company. For the advances received from the Industrial Credit and Investment Corporation of India Limited, the entire property of the assessee including the tea and coffee estates were mortgaged as seen from the schedule to the balance-sheet for year ended June 30, 1968. For the fertiliser unit, separate accounts were maintained for the purpose of claiming benefit under s. 15(c) of the I.T. Act. The assessee had the same head office for all businesses at No. 20, Nungambakkam High Road, Madras. The assessee had claimed only proportionate managing agency commission as a deduction with reference to the taxable income in the first instance and only thereafter the claim was revised by filing a revised return. On the above facts, the AAC took the view in his remand report, that the mere circumstances that the result of the accounts of the three businesses were entered in the accounts maintained at the head office is not determinative of the question as to whether all the three businesses constitute one single business or are different and independent businesses, that the funds supplied from the head office of the three businesses were not also quite material to decide whether there was an integrated business or not, since even in the case of every assessee, who carries on a number of distinct businesses, funds will always be supplied by the head office, that there were separate ledger folios for the three different businesses in the head office and sales of coffee and tea were accounted in the ledger account styled 'coffee sales' and 'tea sales' and their relative expenses were separately recorded in the head office account, that the balance-sheets drawn by the company also give separate figures for each of the businesses and that from these factors, the three business activities cannot be treated as an integrated one. In this view, the AAC, in his report, held that the managing agency commission, sitting fees as well as the head office expenses had to be allocated on the basis of the expenditure in the different items of business, that is, fertiliser, tea and coffee and only that relating to the first two could be allowed as a deduction, as the income from coffee business was completely exempt from tax.
10. The Tribunal on the same set of facts, however, disagreed with the findings of the AAC that each line of business is distinct and separate and that they did not constitute a same and single business and held that the sole test of unity of control propounded by the Supreme Court in various cases has been satisfied in this case where all the three businesses are being carried on, financed and controlled by the same management, that the income from all the businesses passed through the same account and that, therefore, the businesses should be treated as one and the same. While the assessee seeks to sustain the view taken by the Tribunal, the Revenue challenges the view of the Tribunal as legally unsustainable.
11. Before us the learned counsel for the Revenue contends that the onus was on the assessee to show that the three businesses carried on by it were one and the same, and in support of the said submission he referred to the ratio of the decision of the Supreme Court in Chhabda & Sons v. CIT : [1967]65ITR638(SC) . The learned counsel also refers to the decisions of the Supreme Court in Standard Refinery & Distillery Ltd. v. CIT : [1971]79ITR9(SC) and CIT v. Maharashtra Sugar Mills Ltd. : [1971]82ITR452(SC) . The question whether certain businesses carried on by an assessee constitute a single business or separate businesses for purposes of computing their liability to income-tax was considered in one of the earlier English cases in Scales v. George Thompson & Company Limited [1927] 13 TC 83 . It was observed in that case that the question is one of fact, to be decided with reference to the facts of each case. In that case, a limited company was engaged in ship owing and in underwriting. The question arose whether the operations constitute one business or two separate businesses. The company in that case was incorporated in 1905, to take over as a going concern the business of George Thompson & Company, ship-owners, ship and insurance brokers, underwriters and merchants. As regards their under-writing business, the firm had been represented by two of their partners, who acted on behalf of the partnership. The monetary deposit made at Lloyds in respect of these two partners was transferred to the company, but since Lloyds will not recognise a company, these two partners continued to act as nominees and agents of the company, to which all underwriting profits were handed over, the company being responsible for any losses. The profits were brought into the company's accounts with those of the rest of their business. In or about 1919, one of these nominees retired and in 1920 the other died, whereupon the underwriting business was closed. The company claimed that the underwriting business was a business separate from the other activities and, therefore, it should be treated as a separate business in computing their liability to income-tax. The court had accepted the plea of the assessee that the businesses were independent. Rowlatt J. had observed that though the business of underwriting and ship owning have something to do with the ships, one does not depend upon the other, that they are not interlaced, they do not dovetail into each other, except that the people who are in them know about ships, but the actual conduct of the business shows no dovetailing of the one into the other, that they might stop the underwriting and that will not affect their ownership of the ships, they might stop the ship (business) but it will not effect the underwriting, that they might carry on underwriting in a country where there are no ships except that it would not be commercially convenient and, therefore, the two businesses have nothing whatever to do with one another. Dealing with a contention of the Revenue in that case that the company is one and that it declares one dividend and, therefore, the two businesses carried on by the company should be taken to be a single business, the court observed that the company can carry on two businesses, although it may, for the purpose of convenience, if it wishes, amalgamate the proceeds before paying the shareholders, that the method of book-keeping will not throw any light on the question and that the real question to be considered was whether there was any interconnection, interlacing, interdependence and unity at all embracing those two businesses. In one of the earliest cases in South Indian Industrials Ltd. v. CIT : [1935]3ITR11(Mad) a Full Bench of this court dealt with this question. In that case, the assessee company was formed in 1904 to acquire and carry on the business of the Chittivalsah Spinning and Weaving Co., the Madras Portland Cement and Tile Works, Rice Mills and Foundry. The said company thereafter purchased a large number of shares in a jute company and received in the year of account a sum of Rs. 1,40,000 by way of dividends. Against this income, the assessee claimed set off of Rs. 1,59,489 odd, being the loss alleged to have been sustained in the Rice Mills, Cement Works, Brick and Tile Works and the Foundry, including a sum of Rs. 37,015 odd as depreciation. It was found that the assessee company carried on the various businesses till 1925, and that from 1925 onwards, it merely existed to dispose of its various concerns to the best advantage before closing down finally. No trade was done in the year of account in regard to the business in respect of which the set-off was claimed except sales of old stock. But the holding of the shares in the jute company continued. The Revenue contended that the assessee-company was not entitled to set off against the dividends, the losses sustained in the other concerns inasmuch as the assessee had ceased to carry on the business of those concerns. On a reference, this court held that the various concerns acquired by the company were separate businesses and, therefore, the assessee-company was not entitled to set off the losses claimed against the income from dividends. Beasley C.J., speaking for the Full Bench, observed that because a company carries on several concerns, it cannot be held that all are one business, that a company can carry on several distinct and separate businesses and it must always be a question of fact whether those businesses are separate businesses or whether they are so interlocked with the main and chief business of the company as to be really one business, for example a railway company carrying on a steam boat business in connection with its railway. After referring to the decision in Scales v. George Thompson & Company Limited [1927] 13 TC 83 , referred to above, the court observed that the principle laid down in that case covered the case before the Full Bench, that the company could cease any one or more of its activities without stopping the others and without getting rid of their shareholding in the jute mills and that similarly they could get rid of the jute mill shares without stopping any of their businesses. In Chhabda and Sons v. CIT : [1967]65ITR638(SC) , the question arose as to whether the business of exhibiting cinematograph films in Ahmedabad and a similar business carried on by the same assessee in Bombay were one and the same business. The Tribunal held that the two businesses are independent of each other with separate identifiable books of account and that the opening of another and the mere circumstance that the result of the accounts of the different ventures were maintained at the head office, no inference necessarily arose that the exhibition of films in different theatres constituted the same business. Further, it was observed that there is no such general principle that where an assessee carries on business ventures of the same character at different places, it must be held as a matter of law that the ventures are parts of a single business, that whether different ventures carried on by the assessee form parts of the same business must depend on the facts and circumstances of each case, and it is for the assessee to establish that the different ventures constitute parts of the same business and that if the assessee carries on several distinct and independent business, and one of such businesses is closed before the end of the previous year, he cannot claim allowance under s. 10 of the Indian I.T. Act, 1922, of an outgoing attributable to the business which is closed against the income of his other businesses in that year. In CIT v. Prithvi Insurance Company Limited : [1967]63ITR632(SC) , the Supreme Court pointed out that in determining whether two lines of business constitute the 'same business' within the meaning of s. 24(2) of the I.T. Act., the income-tax authorities must consider the interconnection, interlacing, interdependence and unity of control furnished by the existence of common management, common business organisation, common administration, common fund and a common place of business. This has been again reiterated in Standard Refinery & Distillery Ltd. v. CIT : [1971]79ITR9(SC) . In CIT v. Maharashtra Sugar Mills Ltd. : [1971]82ITR452(SC) , the Supreme Court has held that cultivation of sugarcane and manufacture of sugar by the assessee constitute one single and indivisible business. In B.R. Ltd. v. Gupta, CIT : [1978]113ITR647(SC) , the Supreme Court laid down certain tests for the purpose of ascertaining whether two lines of business constitute the same business. According to the Supreme Court, the decisive test is unity of control and not the nature of the two lines of businesses, that the fact that one business cannot conveniently be carried on after the closure of the other may furnish a strong indication that the two businesses constitute the same business but no decisive inference can be drawn from the fact that after the closure of one business, another may or may not conveniently be carried on. In that case, the assessee having incurred a loss in the business of import and sale of fabrics in the calendar year 1952, which was the previous year relevant to the assessment year 1953-54, closed the business towards the end of that calendar year and started from the commencement of the calendar year 1953 relevant to the next assessment year 1954-55, the business of exporting cotton textiles and earned profits in the business in that year and subsequent years. In view of the common management and common control of the businesses, it was held that the assessee was entitled to carry forward the loss in the import business in the assessment year 1953-54, and set it off against the profits of the export business of the assessment years 1954-55 to 1956-57. We have to apply the principle laid down in the above decisions to find out whether the three businesses carried on by the assess
ee in this case is one and the same business as claimed by the assessee.
12. The learned counsel for the Revenue refers to the recent decision of this court in Waterfall Estate Ltd. v. CIT : [1981]131ITR207(Mad) , as supporting his stand. The learned counsel for the assessee strongly relies on the decision of the Supreme Court in B.R. Ltd. v. Gupta CIT : [1978]113ITR647(SC) , and contends that the decisive test to be applied in this case is the unity of control and not the nature of the lines of business, and that as this case satisfies the test of unity of control, it should be held that the assessee is carrying on the same business though the lines of business carried on by it may be different. But we are of the view that the said decision of the Supreme Court cannot be taken as laying down that unity of control is the only and sole test to be adopted as contended by the assessee. On the facts of that case, the Supreme Court had to consider the efficacy of the two tests, one, unity of control and, the other, the different lines of business, and as between the two tests, the Supreme Court expressed the view that the test of unity of control should prevail over the other test relating to nature and the lines of business. The said decision of the Supreme Court cannot be taken to have overruled its earlier decisions which laid down the multifarious tests to determine whether the various businesses run by an assessee is one and the same or different and independent businesses. If unity of control is taken to be the sole and exclusive test, then in all cases where an assessee finances, controls and carries on more than one business, then all businesses will have to naturally be treated as one business, because there is unity of control. We are of the view that the decision of the Supreme Court in B.R. Ltd. v. Gupta, CIT : [1978]113ITR647(SC) , can be taken as an authority only for the proposition that merely because the assessee carries on various lines of business, it cannot straightaway be said to be different businesses and the question as to whether the different lines of business formed part of the same business has to be decided with reference to the other tests such as interconnection, interlacing, interdependence and unity of control. It is no doubt true in this case, the test of unity of control is satisfied as has been held by the Tribunal but the other tests such as interconnection, interlacing and interdependence, are not satisfied. As pointed out by the Supreme Court in Standard Refinery and Distillery Ltd. v. CIT : [1971]79ITR9(SC) , the concepts of interconnection, interlacing and interdependence are not free from ambiguity. Therefore, the objective tests pointed out in CIT v. Prithvi Insurance Co. Ltd. : [1967]63ITR632(SC) and Produce Exchange Corporation Ltd. v. CIT : [1970]77ITR739(SC) for finding out the existence of interconnection, interlacing and interdependence have to be applied. Applying the objective tests formulated in the two cases referred to above, we have to find out whether the concepts of interconnection, interlacing and interdependence are established in this case. In Standard Refinery & Distillery Ltd. v. CIT : [1971]79ITR589(SC) , the Supreme Court by applying certain objective tests held that an assessee who owned a distillery and who had also acquired a sugar refinery on lease from a company and later on acquired shares in the same company and dealt with the same was carrying on the same business and, therefore, the loss incurred in the sale of shares can be carried forward and set off against the income from the sugar manufacturing and distillery. The objective tests adopted by the Supreme Court were : (1) whether the shares dealt with by the assessee were one of the number of commodities in which the assessee dealt in the ordinary course of business, and (2) whether there was any element of diversity or distinction or separateness in regard to the transaction in shares qua the other trading activities of the company. By adopting the same objective tests as have been adopted by the Supreme Court in that case, we find that the assessee, in this case, was originally carrying on the business in tea. Later, it acquired coffee plantations and began dealings in coffee. Later, the assessee changed its name from Blue Mountain Estates Limited to Blue Mountain Estates and Industries Limited and began to carry on an industrial activity. Therefore, it cannot be said that it is not possible for the assessee to carry on one activity without reference to the other. No doubt the test of unity of control is established in this case as the finances and the control were from the head office of the company. To find out whether there is interconnection, interlacing and interdependence, we have to see whether the goods dealt with by the assessee in one business could be treated as one of the commodities in which the company dealt in the ordinary course of business. At the time, when it took up the manufacture of fertilisers, it was already carrying on businesses in coffee and tea. Therefore, the new business undertaken by the assessee cannot be taken to have any connection with the earlier businesses in tea and coffee except that it was carried on by the same company, namely, the assessee. Fertilisers dealt with by the assessee in the new lines of business cannot, in any sense, be taken as one of a number of commodities in which the company dealt in the ordinary course of its business of coffee and tea. Therefore, the manufacture of fertilisers had no interconnection with the existing business in coffee and tea. It is not the case of the assessee that the business of manufacture of fertilisers was undertaken for meeting its own needs, that is, supplying manure for the crops in the coffee and tea plantations. Such a connection was not pleaded either before the authorities below or before us. Therefore, we have to proceed on the basis that the manufacture of fertilisers was taken up as a business independent of the business of production and sale of coffee and tea. Therefore, the facts in this case establish that there is a clear diversity or distinction or separateness in regard to the business of fertilisers qua the other trading activities of the company such as the sale of coffee or tea.
13. In the light of the objective tests evolved in the decisions of the Supreme Court and keeping in mind the basic formulation of Rowlatt J. in Scales v. George Thompson & Co. Ltd. [1927] 13 TC 83 as also the decision of this court in Waterfall Estate's case : [1981]131ITR207(Mad) , we are of the opinion that the Tribunal was wrong in this case in taking the view that all the businesses carried on by the assessee during the relevant years were the same.
14. In this view, we answer the four questions in T.Cs. Nos. 378 to 383 of 1978 in the negative and in favour of the Revenue and we hold that the deductions under the head 'managing agency commission, sitting fees and head office expenses' should be restricted with reference to the income earned in the business carried on in tea and fertilisers and the deduction under those heads cannot be given in relation to the expenses incurred in connection with the business in coffee. Questions Nos. 1 and 2 T.Cs. Nos. 517 to 520 of 1981 are answered in the negative and in favour of the Revenue. The Revenue will have its costs from the assessee. Counsel's fee Rs. 500 (one set).
15. An oral application is made by the learned counsel for the assessee for leave to appeal to the Supreme Court against the judgment just now pronounced. Since our decision is mainly rested on the decisions rendered by the Supreme Court, we do not think that this is a fit case for grant of leave. Hence, the oral application for leave to appeal is rejected.