COMMISSIONER OF INCOME TAX DELHI II vs. MONNET INDUSTRIES LTD.

ITA - 450 / 2008HC Delhi21 November 200821 pages
For Petitioner: MR.R.D.JOLLY
AI SummaryDismissed

What did the High Court hold?

The Tribunal held that the interest paid on borrowed capital for setting up a new line of business, which is in the same business fold and demonstrates unity of control, management, and intermingling of funds, can be claimed as a deduction. The High Court upheld this decision, finding no substantial question of law.

What were the facts?

The assessee claimed pre-operative expenses, including significant financial charges (interest on borrowed funds), for setting up a new sugar plant as revenue expenditure. The Assessing Officer disallowed this claim, viewing the sugar plant as a new source of income and not the same business as the existing ferro alloy manufacturing. The CIT(A) and the Tribunal allowed the claim, finding unity of business and management.

What were the issues?

Whether interest on borrowed funds for setting up a new business, which is in the same business fold, can be treated as revenue expenditure. Whether the sugar plant constituted the 'same business' as the existing ferro alloy manufacturing.

Which sections of the Income-tax Act were involved?

Section 36(1)(iii),Section 28

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* IN THE HIGH COURT OF DELHI : NEW DELHI + %

Judgment reserved on : 03.09.2008

Judgment delivered on : 21.11.2008

COMMISSIONER OF INCOME TAX DELHI-II

..... Revenue

versus MONNET INDUSTRIES LTD

..... Respondent

Advocates who appeared in this case:

For the Revenue

: Mr R.D. Jolly For the Respondent : Mr Ajay Vohra & Ms Kavita Jha

CORAM :

Hon’ble Mr.Justice Badar Durrez Ahmed Hon'ble Mr. Justice Rajiv Shakdher

1.

Whether the Reporters of local papers may be allowed to see the judgment ?

Yes

2.

To be referred to Reporters or not ?

Yes

3.

Whether the judgment should be reported in the Digest ?

Yes Rajiv Shakdher, J.

1.

This is an Appeal by the Revenue under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the „Act‟) preferred against the judgment of the Income Tax Appellate Tribunal (hereinafter referred to as the 2008:DHC:3088-DB „Tribunal‟) passed in ITA No. 4040/D

The order continues below.

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