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2015 (7) TMI 1029 - HC - Income TaxPre-capitalization expenses towards expansion of its business disallowed - ITAT allowed claim - Held that:- As decided in Jay Engineering Works Ltd. v. CIT [2007 (10) TMI 286 - DELHI HIGH COURT] semingly diverse and disparate lines of business can yet be treated as part of the same business provided certain important parameters are kept in mind - that both should have common management and that the funds used for the purposes of the existing business as well as the new entity should be common - There can be no dispute that new venture was managed from common funds - This Court notices that in Jay engineering (supra) itself, the Challapalli (1974 (10) TMI 3 - SUPREME Court), as relied upon by Revenue holding was noticed and at the same time distinguished in the light of the previous ruling in India Cements Ltd. v. CIT [1965 (12) TMI 22 - SUPREME Court]. The important point of distinction noted by the Court in Jay Engineering (supra), to say that Challapalli (supra) was inapplicable, was that in that case the assessee had borrowed considerable sums of money for installation of plant and machinery, and interest was sought to be loaded on the cost of plant and machinery. The AO had rejected the assessee’s claim and held that interest was an important part of revenue expenditure and no depreciation could be claimed as was done in that case. The assessee’s contention in that respect was accepted by the Supreme Court. - Decided against revenue.
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