TaxTMI 
TaxTMI 
1962 (12) TMI 65
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..... The object of the company among others is: "...to carry on business in fibrous articles, viz., cotton, jute, etc., to purchase, sell or 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 Rs. 3,84,684 from its undertaking of cotton spinning. The loss carried forward from the preceding year was Rs. 2,89,197. After adjusting ....
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.... company commenced in January, 1949, and which was stopped by December, 1949. It was submitted that the machineries were entirely different, the machineries used for silk weaving could not be used for cotton spinning, 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 se....
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....any in the assessment year 1952-53, and that, therefore, it was entitled to the benefit of section 15C of the Act. The Income-tax Officer, however, chose to take the view that the spinning business, though it came into existence only in the assessment year 1952-53, 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 com....
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....ssarily any connection with the weaving mill, in the sense that it can be operated independently of the other, the exemption contemplated by section 15C must apply to each of the two industrial undertakings irrespective of the other. It seems to us that this contention is sound and has to be accepted. The reasons that have 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 havin....