2019 (4) TMI 972

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....leting the disallowance of Rs. 1,87,16,047/­ incurred by the assessee as preoperative expensive for "Mawa Project" a new project unconnected with the existing business which was capital in nature and not deductable u/s 37(1) of the Act? 2. Brief facts are as under; The Respondent­Assessee is a private limited company and is engaged in the business of manufacturing Ice­cream and other milk products. For the assessment year 2010­2011 the assessee had filed return of income which was taken in scrutiny by the Assessing Officer. He noticed that the assessee had incurred expenditure of 1.80 crores (rounded of) in process of setting up a factory for production of Mawa, which project the assessee was forced to abandon. The Ass....

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....eam. The company had object of production of milk and milk products and ice­cream. Merely because the new unit was being set up at a place distant from the existing unit, would be of no consequence. Counsel relied on certain decisions, reference to which, would be made later. 5. The facts on record as culled out by the tribunal are that the assessee­company was set up with the objects to produce or caused to be produced by process, grate, pack, store and sell milk products and ice­cream. In furtherance of such objects, the assessee had already set up an ice­cream producing unit. Using same management, control and accounts, the assessee attempted to set up another unit for production of Mawa, which is also a milk product. ....

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....inst this, the Appellate Tribunal has culled out the propositions of law based on various judgments of the apex court as well as of various High Courts in para. 28 of its order. It has summarised propositions and determined the tests on the question of unity of business. They are as follows : (i) The nature of the two lines of business is not relevant. (ii) The fact that one business can be conveniently closed down without affecting the other business is a strong indication that both the businesses are distinct and separate. But no decisive inference can be drawn from the fact. (iii) The decisive test is the unity of control which is indicated by interlacing, interdependence and interconnection between the busines....

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....circumstances that the deduction under the particular section was held allowable. 11. The Tribunal has come to the conclusion that the decisive test is the unity of control which is indicated by interlacing, interdependence and interconnection between the businesses and dovetailing of one into the other. In the present case, it is quite clear that the amalgamation of the subsidiary was allowed by the High Court. Thereafter it is for the management of the company to manage its affairs and the benefit which would be available for the borrowings done for a unit would certainly be claimable by the company as such. Section 36(1)(iii) which permits the amount of interest paid in respect of capital borrowed for the purposes of the busines....