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TMI Blog1985 (7) TMI 166X X X X Extracts X X X X X X X X Extracts X X X X ..... ary object of carrying on business in cotton and kapas. On 1-4-1980 the company became a partner in a firm. The share of profit was 60 per cent. This firm was dissolved on 11-1l-1980 and the company took over the entire business. We may state here that it was specifically mentioned in the partnership deed that the company was incorporated with the object of taking over the business assets and liabilities of the partnership. 3. The assessee's share in respect of the business of the firm amounted to a loss of Rs. 16,005. In the return filed the assessee claimed that this loss should be set off against the business income. The assessee after take over of the business had continued purchase of cotton and converting the same into lint. It is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore, it could not be considered as an industrial company. Although we agree that the main deployment of the funds are not on the processing of lint, nevertheless we have to consider the claim of the assessee under the Explanation to section 2(8)(c) of the Finance Act. As per this Explanation, if more than half of the income is from an activity of processing, then, the assessee would be considered as an industrial company. In the case before us, the income from such processing accounts for more than Rs. 4 lakhs and, therefore, the assessee will come under the Explanation aforesaid. Thereupon, Shri Santhanam submitted that the assessee is merely getting the cotton processed into lint in the factory of others. As per the decision of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lcutta High Court's decision relied on by the assessee was a case where the assessee was getting his printing and binding of books done by others. In that case, the assessee was a publisher of books. The assessee's job was to get the manuscript for publication, hit upon a suitable format for the book, get it printed as per its requirements under its supervision, get the book bound after suitable changes and then put out the publication for sale. In all these activities, the assessee had to play an active role of coordinating the activities in a business-like manner. The Calcutta High Court found all these activities dovetailed into one another and the stage from the acquisition of the manuscript right up to the publication was one integrate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the other company were under the direct supervision of the assessee's own technically qualified staff and under the assessee's own quality control. Raw materials and packing was also done by the assessee. It was under these circumstances that the Bombay High Court held that the assessee would be considered as an industrial company although they themselves did not own the machineries. It will be seen that in this case again emphasis is laid on the supervision and control of the manufacturing process by the assessees themselves although the actual manufacture might be done with the help of the machineries belonging to the others. The Delhi High Court had also considered a similar issue in the case of Orient Longman Ltd. v. CIT [1981] 130 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e incurred in connection therewith will be only a capital expenditure. It is true that the partnership deed itself mentions the intention of the company in becoming a partner. But that would not be sufficient for holding that the share of loss allocated to the assessee would amount to a capital expenditure. In taxation laws, there is a distinction between motive and purpose. The Bombay High Court has laid down as early as 1956 in the case of Bai Bhuriben Lallubhai v. CIT [1956] 29 ITR 543 that there is a difference between the motive for incurring an expenditure and the purpose of the expenditure. The motive with which the assessee may have incurred an expenditure would be irrelevant and what was relevant is only the purpose. We may mention ..... X X X X Extracts X X X X X X X X Extracts X X X X
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