9911796707
TMI Blog1981 (9) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessment year in question is the year 1965-66, the corresponding previous year being the year which ended on 3lst March, 1965. It is common ground that during the previous year the factory building of the assessee was in the process of construction and the plant and machinery were in the process of installation. The business had not been set up and none of the units had commenced production. During the previous year, the assessee had certain types of miscellaneous receipts. It supplied tender forms regarding construction and erection of plant and machinery to contractors on payment of charges. The gross receipts amounted to Rs. 50,540 and after deduction of estimated expenditure, the net receipts came to Rs. 40,540. The company also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e intention of carrying on any business in timber but because their removal was necessitated by other circumstances. The trees, he pointed out, formed capital assets and their removal was a casual happening in the course of operations in the clearance of the site. It appears that, in dealing with the appeal for 1964-65, the AAC had held that the receipts by way of water and electricity charges and on the sale of boulders and stones could not be considered as income. But a copy of that order is not available to us. Following the orders for the earlier assessment years, the AAC deleted the above additions from the assessment for 1965-66. The Revenue preferred an appeal to the Income-tax Appellate Tribunal. It may be mentioned here that for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actors engaged in the task of constructing the factory building and erecting the machinery. The receipts, therefore, directly went to reduce the cost of construction and erection and should be treated as deductions from such costs and not as revenue receipts. Similarly, receipts on account of sale of trees and grass and stones and boulders were in connection with the work to be done for clearance of the land to be used for the purpose of erection of the factory. These amounts would go to reduce the cost of land utilised for the construction of the factory and erection of the equipment. These receipts were directly related to the capital structure of the business which was being set up. On the other band they did not by themselves set up an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17,818 on account of stone and boulders, and (d) receipt of Rs. 7,520 by way of recovery from contractors for providing them with electricity and water at the sites, constituted income, profits and gains of the assessee-company chargeable to tax under any of the heads specified in section 14 of the Income-tax Act, 1961, for the assessment year 1965-66 ?" We find ourselves completely in agreement with the reasoning given by the Tribunal. So far as the receipts from the sale proceeds of trees, grass, boulders and stones are concerned, they represent the sale proceeds of capital assets and are, therefore, capital in nature. So far as the receipts on account of tender forms and by way of water and electricity charges to the contractors are c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as being set up. Learned counsel for the applicant referred to the decision of the Calcutta High Court in CIT v. Ajmera Industries P. Ltd. [1976] 103 ITR 245. In that case the question was whether the income derived by way of rent from a certain building was assessable as income from business or as income from house property. That is not the question here. But that apart, as the Tribunal has rightly pointed out, it is not as if every item of receipt, prior to the setting up of a business, would be only capital in nature. If, for example, the surplus monies of the company are invested to earn interest or if, as in the Ajmera Industries' case [1976] 103 ITR 245 (Cal), the building constructed was not used by the company but let out to earn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AAC for the assessment years 1963-64, 1964-65 and 1965-66. The orders of the AAC in some penalty matter have been printed instead. Again, as already stated, the Tribunal has followed the earlier order of the Tribunal in relation to the assessment years 1963-64 and 1964-65, and neither party appears to have moved the Tribunal for annexing these relevant orders of the Tribunal as part of the case. Copies of these orders have been placed before us by counsel for the respondent and we have referred to them only for purposes of completeness. The order of the Tribunal for the assessment year in question is quite self-contained and our conclusion does not in any manner depend on the findings of fact contained in the earlier appellate orders to whi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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