TMI Blog1991 (9) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... siness can be held to be in the course of the assessee's business of promoting companies?" The assessee is a company carrying on the business of manufacture and sale of electrical insulating press boards and multiply press paper. Articles 16, 19 and 21 of the articles of association and the memorandum of objects of the company also authorise it to carry on the business of promoting other companies. In pursuance of that object, the assessee obtained on August 14, 1973, a licence from the Government of India for the establishment of a new industrial undertaking at Ramanagaram, Bangalore, for the manufacture of mica paper with the intention of transferring it to a newly incorporated company called " the Laxman Isola Ltd. " The letter of inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ------------------------------------------------------------------------------------ On buildings For technical Others including Total know-how for machinery ----------------------------------------------------------------------------------------------------------------------------------------------- 1974 1,17,627 80,000 - 1,97,627 1975 4,25,262 - - 4,25,262 1976 3,43,420 - 21,000 3,13,443 6,77,863 ------------------- ------------------------ -------------------------- --------------------------- 8,86,309 80,000 3,34,443 13,00,752 1977 3,43,868 - 8,39,123 11,82,991 --------------------- ----------------------- ------------------------ -------------------------- 12,30,177 80,000 11,73,566 24,83,743 -------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ground that the borrowings were to create assets which were diverted as the capital of the new company. The Appellate Tribunal, however, did not agree with the stand taken by the Revenue and allowed the appeals filed by the assessee before it. Hence, these references. The Appellate Tribunal held that, (1) the assessee is a company carrying on the business of manufacture and sale of electrical insulating press boards and multiply press paper ; (2) the new undertaking started by the assessee (which is now vested in the new company called Laxman Isola Ltd. ) was to manufacture mica paper; (3) the articles of association and the memorandum of association of the assessee authorise it to promote other companies ; (4) the letter of intent to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part of its own business though it may have had an idea of transferring it eventually to the new company being promoted by it. In the circumstances, use of the borrowed funds for meeting the expenditure for setting up that undertaking could only be regarded as laying out of the borrowed capital for the purpose of the assessee's own business. It is now well-settled that even where the borrowed capital is used for meeting the capital expenditure, the interest paid thereon should be allowed as a deduction if the borrowal is after the setting up of the business." The Appellate Tribunal was justified in concluding, from the facts and circumstances, that there was no trusteeship in respect of the setting up of the new company by the assessee, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her, on the application of the settled tests, different ventures carried on by an individual or a company form the same business is a mixed question of law and fact. Certain principles are applied to determine whether, on the facts found, a legal inference can be drawn that the different ventures constitute separate businesses or, viewed together, can be said to constitute the same business. These principles were stated by Rowlatt J. in Scales v. George Thompson and Co. Ltd. [1927] 13 TC 83, 89. The learned judge observed : ".... the real question is, was there any interconnection, any interlacing, any interdependence, any unity at all embracing those two businesses ? The learned judge also observed that what one has to see was whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the interest paid on the borrowings by a company which was already manufacturing various articles, and the proposed expenditure resulted in the expansion of the said manufacturing activity. Further, the test of enduring benefit is not an exclusive and sole test to determine whether an expenditure is in the nature of a capital or a revenue expenditure (vide Empire jute Co. Ltd. v. CIT [1980] 124 ITR 1 (SC) at page 10). Mr. Raghavendra Rao relied heavily on the decision of the Supreme Court in A. V. Thomas and Co. Ltd. v. CIT [1963] 48 ITR 67. The facts of the said case were entirely different. It was a case of advance made to purchase certain shares. The new company was sought to be promoted by another agency. The advance was treated a ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
