9911796707
TMI Blog1962 (12) TMI 65X X X X Extracts X X X X X X X X Extracts X X X X ..... produce fibrous articles such as yarn cloth, silk wool, etc., to purchase necessary machinery required for the same..... The company constructed buildings, purchased the necessary machineries for weaving silk cloth, installed them and started manufacture of weaving silk cloth on January 12, 1949. As this business resulted in loss to the company, silk weaving was stopped by December 31, 1949. 3. The assessee company installed machineries for the manufacture of cotton yarn and separate buildings were also constructed for installing such machinery. The erecting of these machineries started in the first week of June and the assessee company started the manufacture of cotton yarn from March 24, 1951. 4. For the year ending December 31, 1955, relevant to the assessment year 1956-57, the company derived an income of ₹ 3,84,684 from its undertaking of cotton spinning. The loss carried forward from the preceding year was ₹ 2,89,197. After adjusting the said loss carried forward against the profits of the year, the balance came to ₹ 95,487. In the assessment for the year 1956-57, relevant to the accounting year ending December 31, 1955, the company contended that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning, that one is not ancillary to the other, separate folios had been kept in the ledger for these two businesses and that there was no joint buying and the two businesses were distinct and separate. It was submitted that the cotton spinning factory of the assessee-company was a newly established industrial undertaking of the company which commenced production on March 24, 1951, within the previous year relevant to the assessment year 1952-53 and hence the provisions of section 15C applied to the said undertaking for the assessment year 1952-53. 8. The Tribunal observed that the company sought permission of the Government to use cotton yarn on the looms erected in the silk weaving department, the losses incurred by the company in the weaving department had been set off against the trading results of the spinning department under section 24(2) and that such set-off could have been possible only if the businesses had been the same. It further observed that there was no separate capital, that some of the major expenses have not been allocated between the weaving department and the spinning department and that there was intermingling of funds. It also observed that in one way it co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2-53, was nevertheless part of the textile mill which had been started by the company in 1949 itself. In his view, therefore, the exemption contemplated by section 15C of the Act would be available only from the assessment year immediately following the production of silk cloth, and since the exemption was limited to a period of five years, it was not available in respect of the assessment year 1956-57. On appeal, the Appellate Assistant Commissioner agreed with the Income-tax Officer. He too observed that the two businesses are connected with the same branch of trade or manufacture, that one business is ancillary to the other, that the two businesses are controlled on one account and that financial arrangements and banking accounts are also common. He therefore, held that the weaving business that was started in 1948, and the spinning business which was started in 1951, were parts of the same business and that the date of commencement must be taken to be the date on which any part of this single joint venture was started, that is, 1948. He also thought that the expression any industrial undertaking in section 15C must refer to the unit as a whole and not to parts of a single uni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve been advanced by the departmental officers and the Tribunal appear to us to be some what superficial. Solely for the reason that the spinning mill and the weaving mill relate to the same part of what may be called the textile industry, it does not follow that the spinning mill cannot be a separate industrial undertaking distinct from the weaving mill. It is common knowledge that mills confine themselves only to spinning yarn and several others to weaving only, while there are other composite mills engaging themselves in both kinds of activity. It is not, therefore, proper to say that once a weaving mill started and worked for some time, whether or not that weaving mill obtained any exemption under section 15C of the Act, the subsequent installation of a spinning mill as a distinct entity, with separate buildings and separate machinery must be regarded as having come into existence even on the date on which the weaving mill itself came into existence. One of the features relied upon by the Tribunal that the textile industry takes in both parts of activity, i.e., weaving and spinning, cannot, to our minds, make the two parts of the same undertaking in all cases. The other grounds, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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