Common business purpose and pooled financing may prevent a new contract from becoming a separate income source.

Where multiple activities are financed from a common pool and carried on under common management with a common business purpose, the commencement of a new contract does not by itself create a separate source of income for tax purposes. Applying that principle, the text states that a contract awarded by Bhilai Steel Plant was not treated as a new source of income under the Income-tax Act, 1961. On the same factual basis, depreciation on Poclain machinery was sustained for 23 months rather than 14 months because the machinery was treated as part of the integrated contract business. Both referred questions were answered in favour of the assessee.

---

---

Issues: (i) Whether the contract awarded by Bhilai Steel Plant constituted a new source of income within the meaning of the second proviso to sub-section (2) of section 3 of the Income-tax Act, 1961; (ii) Whether depreciation on Poclain machinery was rightly allowed for 23 months instead of 14 months.

Issue (i): Whether the contract awarded by Bhilai Steel Plant constituted a new source of income within the meaning of the second proviso to sub-section (2) of section 3 of the Income-tax Act, 1961.

Analysis: The decisive test was treated as the head of income and the commonality of purpose. Where finance is drawn from a common pool and the businesses are run under common management, the mere commencement of a contract activity at a different date does not necessarily create a separate source of income. The approach adopted by the Tribunal was found consistent with the principle that all such activities may remain part of a common business structure.

Conclusion: The contract was not a new source of income and the finding was upheld against the Revenue.

Issue (ii): Whether depreciation on Poclain machinery was rightly allowed for 23 months instead of 14 months.

Analysis: The depreciation claim was linked to the same factual and legal determination concerning the commencement and integration of the machinery in the contract business. Since the Tribunal's approach to the business structure and use of the machinery was accepted, the longer depreciation period allowed by the Tribunal was sustained.

Conclusion: Depreciation for 23 months was correctly allowed and the Revenue's objection failed.

Final Conclusion: Both referred questions were answered in favour of the assessee, and the Revenue did not succeed on either issue.

Ratio Decidendi: Where multiple activities are financed from a common pool and carried on under common management with common business purpose, the commencement of a new contract does not by itself create a separate source of income for tax purposes.

---