TMI Blog1986 (2) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... evant to the assessment year 1969-70, the assets of this project consisting of land, building and machinery, etc., were transferred at the book value to a public limited company, Dey-Se-Chem Ltd., which was incorporated with the assessee-company and its sister concern, Dey's Medical Stores (P.) Ltd., holding more than 51 per cent. of the shares of the new company. The Income-tax Officer, in the assessments for 1969-70 and 1970-71, disallowed the proportionate interest on bank overdraft attributable to the borrowings for investment on this project. He also reopened the assessments for the assessment years 1966-67 to 1968-69 under section 147(b) of the Income-tax Act, 1961 (" the Act "), and in the reopened assessments disallowed the proportionate interest on bank overdraft attributable to investment on this project. The assessee-company went up in appeal before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner upheld the reopening of the assessments under section 147(b) for the assessment years 1966-67 to 1968-69. He, however, held that the interest on bank overdraft attributable to investment in the chloramphenicol project should be allowed as a deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a new business at all. Mr. Bajoria argued that the Tribunal failed to take into consideration the well known tests for deciding whether the new project was a new business or not. In this case, the business was carried on by the same management and the accounts were all kept in the company's books of account and separate accounts were not maintained for the new project. In fact, the Tribunal failed to enquire into these things and to that extent, the finding of the Tribunal was vitiated in law. Whether the chloramphenicol project was separate and distinct from the assessee's existing business is basically a question of fact. The Tribunal has given reasons for coming to the conclusion that the new project was separate and distinct from the assessee's existing business. The Tribunal has noted that the chloramphenicol project was set up under a separate industrial licence issued by the Government of India. The land, building and machinery were kept separate from the existing business installations of the assessee. The Tribunal has also noted that the chloramphenicol business along with the land, building and machinery were ultimately transferred at cost by the assessee to another pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laced and argued before the Tribunal. The assessee's contention has been set out in paragraph 4 of the Tribunal's order where it was submitted on behalf of the assessee that the business of the company was the manufacture of medicinal products and, therefore, the project for manufacture of chloramphenicol, even if it was a basic product, amounted to an extension of the assessee's business. It was further contended that even if this project was transferred to another public limited company, Dey-Se-Chem. Ltd., it was obvious that the investment was not for earning dividend income but for the purpose of the assessee's own business. It was not the case of the assessee that the same sets of books of account were maintained for the new project as well as the existing business nor was it its case that the same staff was employed for both the projects. It cannot be said that the Tribunal has erred in not taking into consideration something which was not even contended before the Tribunal. The argument that the same balance-sheet is prepared for the project or that the company owned both the projects is also untenable. A company may have a number of undertakings. Whether all the undertaki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Dyestuffs Pharmaceuticals (P.) Ltd. [1982] 138 ITR 843 (Bom) were decided on the basis of findings of fact made by the Tribunal. In those cases, the Tribunal found that the assessee had not set up a separate and an entirely new undertaking. The Bombay High Court held that interest paid on money borrowed for extension of existing business was allowable as deduction even if the extended business did not yield any profit in the relevant year of account. Similarly, in the case of CIT v. Metal Corporation of India Ltd. [1 982] 133 ITR 130 (Cal), the Tribunal had found that the various activities of the company constituted a single business. A Division Bench of this court held on the basis of that finding that an expenditure for installation of zinc smelter was part of the business expense of the company. These cases, in my opinion, do not help the contention of the assessee in any way. The finding of the Tribunal in those cases was that the new business and the old business were parts of the same business. In the instant case, the Tribunal has, on the basis of the materials placed before it, found that the business of manufacture of chloramphenicol was not a part of the existing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment years under the head " work-in-progress ". All the facts about the new project were known to the Income-tax Officer. It was known to the Income-tax Officer that the bank overdraft was being utilised for financing all the activities of the company. The proportionate interest attributable to the investment in the chloramphenicol project was allowed on the basis of facts known to the Income-tax Officer and no new information came into the possession of the Income-tax Officer after the assessments were completed which could prompt him to reopen the assessments. The only question is what was the new information on the basis of which the Income-tax Officer reopened the assessments. The Tribunal has pointed out that the assessee-company could not show even at the time of hearing before it any letter or document by which the fact of utilisation of part of the bank overdraft for investments in chloramphenicol project was specifically brought to the notice of the Income-tax Officer. The Income-tax Officer in the course of the proceedings for the assessment year 1969-70 for the first time came to know of this fact and this amounted to "information " on the basis of which the Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X
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