TMI Blog1984 (2) TMI 125X X X X Extracts X X X X X X X X Extracts X X X X ..... e Commissioner (Appeals) erred in holding that the ITO was justified in disallowing the interest paid by the assessee to the Government of India on the loan obtained by the assessee-company for its Orissa project. 3. The facts of the case relevant to the aforesaid common ground may be summarised as under : The assessee-company, Indian Rare Earths Ltd., is a public sector undertaking, which carries on the business of extracting from beach sands by separation method, minerals such as ilmenite, monazite, rutile, zircon, sillimanite, garnet, etc. In the course of the assessment proceedings for the assessment year 1976-77, the assessee-company claimed, inter alia, deduction of an amount of Rs. 7,480 representing interest at the rate of 10 1/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld that the amounts in question were rightly capitalised, the assessee-company may be allowed depreciation as may be due in accordance with the law. Hence, the present appeals by the assessee-company to the Tribunal. Before us Shri S.E. Dastur, the learned counsel for the assessee-company, at the outset of the hearing explained the nature of the assessee-company's business which is of extraction of minerals such as ilmenite, rutile, monazite, zircon, etc., by separating them from the beach sands. He pointed out that for this purpose, the assessee already had mineral separation plants operating in Kerala and Tamil Nadu. He submitted that the company felt the need for another mineral separation plant for the extraction of the same kind of min ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was a going concern at Baroda, who, in order to expand its business, proposed to establish a new separate glass producing unit at Bangalore. For this purpose, the company borrowed funds on which it had to pay interest which it claimed as deduction under section 36(1)(iii). The Gujarat High Court, following the ratio decidendi of the Bombay High Court in the case of Calico Dyeing Printing Works, held that the assessee's claim was admissible under section 36(1)(iii). The Court found support for this decision in the view taken by the Supreme Court in India Cements Ltd. and also explained how the Supreme Court decision in Challapalli Sugars Ltd. v. CIT [1975] 98 ITR 167 was distinguishable on facts and that such distinction was made by the S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Punjab and Haryana High Court in Pepsu Road Transport Corpn. v. CIT [1981] 130 ITR 18. He also reiterated the argument of the ITO and the Commissioner (Appeals) that the Orissa project was a new business and a totally new undertaking and, therefore, the judicial decisions cited on behalf of the assessee-company are not applicable to the assessee's case. 5. We have given careful thought to the submissions made and arguments put forth from both sides in the context of the facts and circumstances of the assessee-company's case and the relevant case law and we have come to the following conclusion : It is common ground that the assessee-company has been operating two mineral separation plants at Chavara in Kerala and Manavalakurichi in Tami ..... X X X X Extracts X X X X X X X X Extracts X X X X
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