TaxTMI 
TaxTMI 
2015 (9) TMI 1008
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.... unconnected with the existing business." 2. Briefly stated relevant facts of the case are that the assessee is engaged in the business of „manufacturing & marketing of ice-creams‟ of Baskin Robbins Brand. Assessee filed the return of income declaring the total income of Rs. 28,57,36/- under normal provisions of the Act and Rs. 1,50,47,439/- as book profit computed u/s 115JB of the Act. As per the Memorandum of Association (MoA), assessee company is incorporated in 1984 with the object to produce, buy, process, grade, pack, store and sell milk, milk products and ice cream. During the assessment proceedings, AO noticed that the assessee debited expenditure of Rs. 1,24,81,369/- towards cancellation of project involving manufacturing and sale of Khoa, a milk product. The break-up of the above expenditure for the sum of Rs. 1,27,20,969/- is given in a tabular form and the same is narrated on page 5/6 of the impugned order. The said expenditure is divided into various heads viz., salaries wages and allowances; staff welfare and canteen expenses; sampling expenses; conveyance and travelling expenses; rent; professional charges; printing and stationery, postage and courier c....
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....ess. AO interpreted the same as stating a separate project altogether. AO is of the opinion that the said expenditure of Rs. 1,27,20,969/- do not fall in the new field. He also refers the expression „pre-operative expenses‟ from the said letter dated 22.12.2011. AO is also aware of the fact that these expenses are incurred towards aborted Mawa product. However, AO is of the opinion that such Mawa product constitutes a new project entering into new horizons of customers. AO mentioned that the expenditure mainly is for setting up of a new project at Amritsar and therefore, the same is in revenue field. He accordingly held that the expenditure of Rs. 1,27,20,969/- is not an allowable expenditure u/s 37(1) of the Act and proceeded to make an addition. Aggrieved with the said addition, assessee filed an appeal before the CIT (A). 3. During the proceedings before the CIT (A), assessee filed written submission dated 23.10.2012. In the said written submissions, assessee explained the background of assessee-company and informed the above referred details of Mawa project and also communicated the said expenditure was considered as a capital work-in-progress in the books of accou....
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....iness activity, that would mean that such a new business like Mawa project constitutes the same business. They also referred to various subsequent judgments viz (i) Hooghly Trust (P) Ltd vs. CIT (73 ITR 685); (ii) Production Exchange corporation Ltd vs. CIT (77 ITR 739) and others. Assessee also cited the binding judgment of the jurisdictional High Court in the case of CIT vs. Tata chemicals Ltd (256 ITR 399) for the said identical proposition. Thus, the case of the assessee is that the Mawa project being milk dairy product constitutes the same existing business and they qualify the characters of interlacing, interdependence and interconnection of the Mawa project with that of the existing ice-cream dairy business. He relied on various other decisions from various High Courts in support of his submissions. CIT (A) considered the same and accepted the contention of the assessee and held in favour of the assessee as per the lengthy discussion given in paras 5.1 to 5.4 of his order. CIT (A) is of the opinion that in principle Mawa product is related to the dairy milk products business. CIT (A) is also of the opinion that the assessee qualifies the test relating to the common fund, com....
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....taken in the case of Sterlite Industries (India) Ltd vs. Addl. CIT (102 TTJ 53) (Mumbai), wherein the Hon‟ble Court has held that wherein the appellant sets up new plant which is inter-dependent on the existing ones and are supervised by the common management of the company they are mere expansion of the existing business and therefore assessee is entitled to deduction of interest incurred on funds borrowed financing the new project. Similarly, in the case of Glaxo SmithKline Consumer Health Care Ltd Vs. ACIT (1121 TTJ 94) (Chandigarh), it has been held that development expenses incurred by assessee for introducing and developing new product in the existing line of business merely enables the assessee to remain competitive in the market and retain consumer preferences and loyalty towards brand of products and therefore, it is allowable as revenue expenditure. The expenditure incurred by assessee for expansion and betterment of its existing business would need to be treated as a revenue expense. Reliance is also placed in the case of CIT vs. Usha Iron & Ferro Metal Corp. Ltd (2007) 163 Taxman 256 (Delhi)." Aggrieved with the above, relief granted by the CIT (A), Revenue is i....
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....apital asset to generate income to the assessee on stand along basis. 6. Mawa project is aimed to manufacture and sale of Khoa, which is undisputedly a dairy product for which the assessee is incorporated. The ice-creams of Baskin Robbins fall in the same genus of dairy products. He has also reiterated the fact that the Revenue did not establish the absence of interlacing, interdependence and interconnection of the business activities after considering the set principles of common management administration business organization fund. He also cited various decisions which were already discussed in the above paras of this order. Referring to the judgment of the Hon‟ble Supreme Court in the case of Jonas Woodhead and Sons (India) Ltd (supra) and the Delhi High Court judgment in the case of Triveni Engineering Works Ltd (supra), Ld Counsel for the assessee submitted that the facts are distinguishable so far as the legal propositions are concerned there is no dispute as they all speak of the same language ie so long as interlacing, interdependence and interconnection of the activities are concerned if they are clubbed with the principles of common management administration busine....
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....top of milk before homogenization. Cream being of the less dense, the same is gathered on the top of the dense milk. Therefore, it is not proper for Ld DR to argue that the ice-creams of the Baskin Robbins Brands are not the milk products. 10. Now what is the nature of the „Mawa‟? Is it a milk product or not and if fails in the scope of the assessee‟s business of not. The undisputed facts include that the „Mawa‟ is made up of the milk product and therefore, it is a dairy product and they same is covered within the scope of the declared business of the assessee. We have considered the Ld DRs argument is the preoperative expenditure incurred before a new product is launched constitutes a new business and reject the same. 11. Interlacing of the accounts, management and control: It is a settled proposition in law that so long as there exists the interlacing of the control & management, interlacing of the accounts etc, no new business is said to have been set up. In the instant case, none of these tests are cleared. AO has not made out that the Mawa division is entirely separate from the points of the above and it is unconnected to the „ice-cream di....