TMI Blog1986 (3) TMI 144X X X X Extracts X X X X X X X X Extracts X X X X ..... artmental representative's argument was that the Tribunal in the order filed by the assessee has placed reliance on two Special Bench decisions---one of which was from the Madras High Court in CIT v. Seshasayee Paper Boards Ltd. [1985] 156 ITR 542 has again considered its earlier decision in Addl. CIT v. Madras Fertilisers Ltd. [1980] 122 ITR 139 (Mad.) and has specifically answered this very issue and has held that the interest earned during the course of construction is assessable as income from other sources and that the interest paid on borrowal cannot be allowed for the reason that the borrowal was not for earning of the income but for construction of the factory. He also referred to the decision of the Karnataka High Court in Karnataka Forest Plantations Corpn. Ltd. v. CIT [1985] 156 ITR 275, which has considered the identical issue and has come to identical conclusion as that of the Madras High Court. He, therefore, pleaded that the decision in the assessee's own case needs to be given a rethinking in the light of the recent decisions of the two High Courts. 4. We have given careful considerations to the arguments of both the parties. This Bench in its order dated 9-5-19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come-tax Act, 1961 ('the Act'). 5. In the result, ground Nos. 1 and 2 are decided in favour of the department and against the assessee. 6. The next issue in this appeal is regarding a claim of expenditure of Rs. 2,84,157 and also another item of Rs. 36,342. The first of the amounts have been claimed as expenses on the ground that the assessee, which is being established for purposes of manufacturing of cement and also has been given licence for extraction of minerals from mines has commenced the extraction from the mine of the various minerals. According to the assessee, the extraction activity is an independent activity, which has already been started in the year under review. 7. On behalf of the assessee, it was submitted that the minerals so extracted, no doubt, become the basic raw materials for manufacture of cement, but these are in the nature of independent activity as such which has no relation whatsoever whether or not the construction activity is going on or completed. It was argued that the claim of the assessee has been negatived by placing reliance on the Gujarat High Court decision in CIT v. Sarabhai Sons (P.) Ltd. [1973] 90 ITR 318. It was further argued that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -tax Reference No. 85 of 1970. That decision raised the question as to when a certain business carried on by the assessee could be said to have been set up : whether it was set up prior to 31st March, 1966, or subsequent to that date. The Tribunal had found that it was set up prior to 31st March, 1966, and the question was whether this finding of the Tribunal could be said to be unreasonable or perverse or contrary to evidence or based on no evidence at all. We held on the facts of that case that it was impossible for the Tribunal to have come to the decision that the business was set up by the assessee prior to 31st March, 1966, and the decision of the Tribunal was contrary to evidence or based on no evidence at all. We fail to see how a decision given on one set of facts can bind us to reach a similar decision on a totally different set of facts. There is nothing in this decision which would deflect us from the view which we are otherwise inclined to take." After making the said observation, their Lordships came to the conclusion that extraction of lime stone being one of the activities of the assessee which has been done meant the assessee commencing the business to that exten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of lime stone. They further observed each one of the activities constituted an integral part of the business of the assessee. They observed why then can it not be said that the assessee commenced its business when it started the first of these activities? The activity of quarrying the leased area of land and extracting lime stone from it was as much an activity in the course of carrying on the business as the other two activities of manufacture of cement and sale of manufactured cement. The business could not in fact be carried on without this activity. This activity came first in point of time and laid the foundation for the second activity and the second activity, when completed, laid the foundation for the third activity. The business consisted of a continuous process of these three activities and when the first activity was started with a view to embarking upon the second and the third activities, it clearly amounted to commencement of the business. It may be that the whole business was not set up when the activity of quarrying the leased area of land and extracting lime stone was started. But as pointed out above, business is nothing more a continuous course of activities and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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