2015 (7) TMI 1029

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....alization expenses towards expansion of its business. This was disallowed by the Assessing Officer (AO) as well as the CIT (Appeals) concurrently. The Revenue urges that the ITAT's decision, reversing the view of the lower authorities is contrary to law. 2. Briefly the facts are that the assessee engages itself in the manufacturing of Nylon Tyre Cord Fabrics, Packaging Film, Flurochemicals, Chloromethane and Refrigerant Gases. During the year in question, i.e. 2005-06, it sought to expand its business in polyester films at Indore, pharma chemical business at Bhiwadi and industrial fabrics business at Trichy. Towards these, it claimed expenses to the tune of Rs. 7,03,95,000/- as pre-capitalization costs. The Revenue treated this as proper....

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....d that the funds used for the purposes of the existing business as well as the new entity should be common. Applying these tests, urged learned counsel, the assessee was squarely covered by the ruling in Jay Engineering (supra). In Jay Engineering (supra), a Division Bench of this Court relied upon large number of previous judgments, including judgments of this Court and held as follows: "13. Finally, in Veecumsees v. Commissioner of Income Tax MANU/SC/0884/1996 : [1996]220ITR185(SC) , the assessed ran a jewellery business and then commenced business in the exhibition of cinematographic films. The assessed obtained loans for building a cinema theater and the question was whether the interest payable on the loans borrowed for the new busi....

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....ng these principles to the present case, it is quite clear to us that the control over the two units is in the hands of the same management and administration. There is no doubt on this score and in fact, the annual report of the assessed, which has been shown to us by learned Counsel, makes a reference to the Project at Hyderabad. There can be no dispute from the facts that have been placed before us on record that the new venture was managed from common funds and there is the necessary unity of control leading to an interconnection, interdependence and interlacing of the two ventures such that it can be said that the fuel injection equipment project is only an extension of the existing business of the assessed and, Therefore, the expendit....