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TMI Blog1988 (3) TMI 102X X X X Extracts X X X X X X X X Extracts X X X X ..... y business pertaining to the aforesaid coal mines was nationalised w.e.f. 1st May, 1972 under the Coking Coal Mines (Nationalisation) Act, 1972 and the management was taken over by the Government on 17th Oct., 1971. The assets of colliery business were taken over by the Government and the assessee was to get compensation in respect thereof. After nationalisation of the colliery business the assessee company continued to carry on business as a coal dealer and also the business of advancing loans on interest. The assessee maintained a combined account for its various business activities. 3. For the asst. yr. 1980-81, the assessee filed its return of income on 18th March, 1983 showing a loss of Rs. 29,650. The ITO disallowed the interest am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee which also included business of coal trading. It was further pointed out that the assessee earned interest income of Rs. 43,786. It was submitted that the expenditure incurred on payment of interest of Rs. 55,166 on loans taken by the assessee could not be treated as relating exclusively to the colliery business. The assessee was maintaining one common set of accounts for all its business activities. The amounts borrowed by it were received by the Head Office at Calcutta and were allocated to its various business establishments from time to time. The loans were taken for the composite business and not specifically for the colliery business. It was further submitted that the assessee was maintaining one common officer establishme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a close inter-connection and interlacing of the various activities of the assessee. It was further found that the loans on which the impugned interest was paid was taken by the assessee long before the nationalisation of colliery business. Following the decisions of the Supreme Court reported in Produce Exchange Corporation Ltd. vs. CIT (Central) (1970) 77 ITR 739 (SC) B.R. Ltd. vs. V.P. Gupta, CIT (1978) CTR (SC) 82 : (1988) 113 ITR 647 (SC) the CIT(A) considering the unity of control held that the assessee's business continued to exist even after nationalisation of colliery business. Accordingly it was held that interest paid on the borrowed fund was allowable as a business expenditure under s. 36(1)(iii). The ITO was accordingly direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the assessee to claim deduction in respect of payment of interest on loans borrowed by it before nationalisation of the colliery business. 10. It was further submitted by Shri Saxena that the coal trading business carried on by the assessee was not related to its colliery business and that the two businesses were distinct and separate. It was further contended that the unabsorbed depreciation cannot be allowed to be set off against the income from coal trading business. In support of this contention, reliance has been placed on the decisions of the Bombay High Court in Sahu Rubber (P) Ltd. vs. CIT (1963) 43 ITR 464 (Bom) and Shri Laxmi Printing and Dyeing Works (P) Ltd. vs. CIT (1968) 70 ITR 148 (Bom). 11. Shri N.A. Bhaduri, learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ines (Nationalisation) Act, 1972, only the assets of the colliery business were taken over by the Central Government free from all encumbrances as provided under s. 4(1). Sec. 9(1) of the said Act specifically provided that every liability of the owner, agent, manager or managing contractor of a coking coal mine or coke oven plant shall be the liability of such owner, agent, manager or managing contractor, as the case may be, and shall be enforceable against him and not against the Central Government. It is thus clear that liabilities pertaining to the colliery business were not taken over by the Central Government. Therefore, there is no substance in the argument advanced on behalf of the Department that since liabilities were taken over b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct of which depreciation allowance was originally worked out should remain in existence in the succeeding year. The Allahabad High Court in the case of CIT vs. Virmani industries (P) Ltd., held that it is not necessary that the business in respect of which depreciation allowance was originally worked out should remain in existence nor is it necessary that business assets to which the depreciation pertains must be used in the business carried on in the succeeding year. All that is necessary is that the assessee must carry on some business in the succeeding year in which the set off of unabsorbed depreciation is claimed. So long as an assessee carries some business in the year in which the set off is claimed, the unabsorbed depreciation by fi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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