JUDGMENT
Suhas Chandra Sen, J.
1. The assessee is a limited company. The references relate to the assessment years 1966-67 to 1970-71. The Income-tax Officer, in the course of the proceedings for the assessment year 1969-70, came to know that the assessee-company had made large borrowings from bank for investment on a new project for the manufacture of chloram-phenicol, a basic raw material and a broad spectrum antibiotic, which was extensively used for the treatment of typhoid and skin diseases, etc., and was a component of the assessee-company’s formulations appearing under the name of enteromycetin brand of preparations. The assessee-company obtained an industrial licence from the Government for this project. During the previous years relevant to the assessment years 1966-67 to 1968-69, a portion of the borrowings from bank on overdraft were invested on the project and during the previous year relevant to the assessment year 1969-70, the assets of this project consisting of land, building and machinery,
etc., were transferred at the book value to a public limited company, Dey-Se-Chem Ltd., which was incorporated with the assessee-company and its sister concern, Dey’s Medical Stores (P.) Ltd., holding more than 51 percent. of the shares of the new company. The Income-tax Officer, in the assessments for 1969-70 and 1970-71, disallowed the proportionate interest on bank overdraft attributable to the borrowings for investment on this project. He also reopened the assessments for the assessment years 1966-67 to 1968-69 under Section 147(b) of the Income-tax Act, 1961 (“the Act”), and in the reopened assessments disallowed the proportionate interest on bank overdraft attributable to investment on this project.
2. The assessee-company went up in appeal before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner upheld the reopening of the assessments under Section 147(b) for the assessment years 1966-67 to 1968-69. He, however, held that the interest on bank overdraft attributable to investment in the chloramphenicol project should be allowed as a deduction in working out the business income. The additions on this account made in the assessment years 1966-67 to 1970-71 by the Income-tax Officer were, therefore, deleted by the Appellate Assistant Commissioner. The Appellate Assistant Commissioner further held, for the assessment years 1966-67 to 1969-70, that the interest on bank overdraft attributable to income-tax payments could not be disallowed and that the additions on this account had to be deleted.
3. The Income-tax Officer appealed to the Tribunal. The Tribunal held that the proportionate interest on bank overdraft attributable to investment on the chloramphenicol project could not be allowed as a deduction in all the five years. The Tribunal further held that the reopening of the assessments for the assessment years 1966-67 to 1968-69 was justified. On the question of allowance of proportionate interest on bank overdraft attributable to payment of income-tax for the assessment years 1966-67 to 1969-70, the Tribunal held that this could not be allowed as deduction.
4. The assessee has come up on a reference. Three questions of law have been referred by the Tribunal to this court :
“1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that the proportionate interest on bank overdraft attributable to investments on chloramphenicol project was not an admissible deduction in working out the assessee’s income liable to tax under the Income-tax Act, 1961 ?
2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that the reopening of assessments under Section 147(b) of the Income-tax Act, 1961, was correct and justified ? (Only for the assessment years 1966-67 to 1968-69).
3. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that the proportionate interest on bank overdraft attributable to income-tax payments was not an admissible deduction in working out the assessee’s income liable to tax under the Income-tax Act, 1961 ?” (Only for the assessment years 1966-67 to 1969-70).
5. Mr. Bajoria, appearing on behalf of the assessee, contended that the assessee’s business was manufacture of medicinal products and, therefore, the project for the manufacture of chloramphenicol was in the line of the assessee’s business. It could not be regarded as a new business at all. Mr. Bajoria argued that the Tribunal failed to take into consideration the well known tests for deciding whether the new project was a new business or not. In this case, the business was carried on by the same management and the accounts were all kept in the company’s books of account and separate accounts were not maintained for the new project. In fact, the Tribunal failed to enquire into these things and to that extent, the finding of the Tribunal was vitiated in law.
6. Whether the chloramphenicol project was separate and distinct from the assessee’s existing business is basically a question of fact. The Tribunal has given reasons for coming to the conclusion that the new project was separate and distinct from the assessee’s existing business. The Tribunal has noted that the chloramphenicol project was set up under a separate industrial licence issued by the Government of India. The land, building and machinery were kept separate from the existing business installations of the assessee. The Tribunal has also noted that the chloramphenicol business along with the land, building and machinery were ultimately transferred at cost by the assessee to another public limited company, Dey-Se-Chem. Ltd., in which the assessee-company along with its sister concern held more than 51 per cent. share. It cannot be said that the factors that were taken into consideration by the Tribunal were irrelevant nor can it be said that the conclusion of the Tribunal was not based on any material.
7. The finding of fact by the Tribunal has not been challenged as perverse. It has been argued on behalf of the assessee that the Tribunal’s finding that the chloramphenicol project was separate and distinct from the assessee’s existing business of manufacture and sale of medicinal formulation has been challenged by the assessee, although a question of perversity has not been raised. It has been contended that the finding was vitiated by non-consideration of the relevant factors. It was contended that the Tribunal should have considered whether there was any dovetailing or interlacing of the existing business and the chloramphenicol project. The
Tribunal has not gone into the question whether the same accounts were maintained for both the projects or whether the same staff was employed for the purpose of both the projects. The Tribunal has also ignored the fact that both the projects belong to the company which was being managed by the same board of directors. It has further been contended that in the same balance-sheet of the company, the results of both the business ventures of the company have been shown.
8. There are several reasons why this argument cannot be upheld. The decision of the Tribunal cannot be questioned on a ground which was not canvassed before the Tribunal at all. Whether the new project was separate and distinct from the assessee’s existing business is essentially a question of fact. It has not been shown how the Tribunal has erred in coining to the conclusion that it did. In claiming a deduction, it is for the assessee to establish the necessary facts in support of its claim. A case of dovetailing and interlacing of the new project and the existing business was not made out at all before the Tribunal. It was for the assessee to produce its books of account and other documents to establish whether the same staff was employed or whether the same sets of accounts were maintained or whether the same person was in charge of the new project and the existing business. The Tribunal has taken into consideration whatever had been placed and argued before the Tribunal. The assessee’s contention has been set out in paragraph 4 of the Tribunal’s order where it was submitted on behalf of the assessee that the business of the company was the manufacture of medicinal products and, therefore, the project for manufacture of chloramphenicol, even if it was a basic product, amounted to an extension of the assessee’s business. It was further contended that even if this project was transferred to another public limited company, Dey-Se-Chem. Ltd., it was obvious that the investment was not for earning dividend income but for the purpose of the assessee’s own business. If was not the case of the assessee that the same sets of books of account were maintained for the new project as well as the existing business nor was it its case that the same staff was employed for both the projects. It cannot be said that the Tribunal has erred in not taking into consideration something which was not even contended before the Tribunal.
9. The argument that the same balance-sheet is prepared for the project or that the company owned both the projects is also untenable. A company may have a number of undertakings. Whether all the undertakings constitute parts of one business or the businesses are separate and distinct will depend upon the facts of each case. Merely because all the profits will have to be shown ultimately in one balance-sheet and/or profit and loss account or the company is headed by one board of directors will
not make all the business activities of the company the same business. A company may have many undertakings. All the undertakings of a company cannot be regarded as parts of the same business on the ground that a company is headed by one board of directors and the profits or losses of the various undertakings of the company are ultimately shown in one profit and loss account.
10. It is true that whether there was dovetailing or interlacing of the accounts or whether the management was the same or whether the same staff was employed for working the existing as well as the new projects are relevant considerations. But the facts that were peculiarly within the knowledge of the assessee should have been brought out and placed before the Tribunal. That not having been done, it cannot be said that the Tribunal’s approach was vitiated in any way. The Tribunal has reached its conclusion on the basis of all the facts and arguments that were placed before it and also on the basis of the order of the Appellate Assistant Commissioner which was under appeal. The argument that is now being advanced before this court was not raised before the Income-tax Officer, the Appellate Assistant Commissioner or the Tribunal. In the circumstances, I am unable to uphold the contention that the decision of the Tribunal is vitiated because of non-consideration of matters which could have been raised but were not actually raised before the Tribunal.
11. For the assessment years 1969-70 and 1970-71, the Tribunal has pointed out that there was an added factor for the disallowance. The Tribunal has held that in those two years, the chloramphenicol project did not even belong to the assessee-company and stood transferred to a public limited company, Dey-Se-Chem. Ltd., whose shares were acquired by the assessee-company and the interest on investments made by the assessee-company on the shares of this public limited company could not be allowed as deduction against the business income of the assessee-company.
12. The cases of Calico Dyeing and Printing Works v. CIT [1958] 34 ITR 265 (Bom) and Addl. CIT v. Aniline Dyestuffs & Pharmaceuticals (P.) Ltd. [1982] 138 ITR 843 (Bom) were decided on the basis of findings of fact made by the Tribunal. In those cases, the Tribunal found that the assessee had not set up a separate and an entirely new undertaking. The Bombay High Court held that interest paid on money borrowed for extension of existing business was allowable as deduction even if the extended business did not yield any profit in the relevant year of account.
13. Similarly, in the case of CIT v. Metal Corporation of India Ltd. , the Tribunal had found that the various activities of the company constituted a single business. A Division Bench of this court
held on the basis of that finding that an expenditure for installation of a zinc smelter was part of the business expense of the company.
14. These cases, in my opinion, do not help the contention of the assessee in any way. The finding of the Tribunal in those cases was that the new business and the old business were parts of the same business. In the instant case, the Tribunal has, on the basis of the materials placed before it, found that the business of manufacture of chloramphenicol was not a part of the existing business of the assessee. It was a new business altogether.
15. On behalf of the assessee, our attention was drawn to the case of Woolcombers of India Ltd. v. CIT , Reckitt and Colman of India Ltd. v. CIT and Addl. CIT v. Laxmi Agents (P.) Ltd. [1980] 125 ITR 227 (Guj). It is not necessary to refer to these cases in detail. The question ultimately is whether the new project started by the assessee of manufacture of chloramphenicol is part of the old business or extension of the existing business. The answer to the question will depend upon the facts of each case. It was for the assessee to produce facts and satisfy the Tribunal that the new project was part of the existing business or a mere extension of the existing business of the assessee. All the facts produced before the Tribunal were considered by the Tribunal. It cannot be said that the Tribunal had ignored anything that was produced before it by the assessee. The facts were peculiarly within the knowledge of the assessee. No question of perversity has been raised. Under the circumstances, it cannot be held that the Tribunal’s finding is vitiated in any way. In the case of B. R. Ltd. v. V.P. Gupta, CIT [1978] 113 ITR 647, the Supreme Court emphasised the difference between the two words “same” and “similar” and held that the carrying on of a similar business will not meet the requirement of Section 24(2) of the Indian Income-tax Act, 1922. It was emphasised by Chandrachud C.J. that whether the assessee was carrying on the same business depended essentially on the facts of each particular case.
16. I shall now have to consider whether the reopening of the assessment for the assessment years 1966-67 to 1968-69 under Section 147(b) was valid. The only question that arises is whether there was any information in the possession of the Income-tax Officer on the basis of which he could justifiably reopen the assessment for all these years. There is no question of any omission or failure on the part of the assessee because the proceedings were started under Section 147(b). It has to be noted that both the Appellate Assistant Commissioner and the Tribunal upheld the reopening of the assessments.
17. The case of the assessee is that the investments in the chloramphenicol project were shown in the balance-sheet filed along with the returns of income for the three assessment years under the head “work-in-progress”. All the facts about the new project were known to the Income-tax Officer. It was known to the Income-tax Officer that the bank overdraft was being utilised for financing all the activities of the company. The proportionate interest attributable to the investment in the chloramphenicol project was allowed on the basis of facts known to the Income-tax Officer and no new information came into the possession of the Income-tax Officer after the assessments were completed which could prompt him to reopen the assessments.
18. The only question is what was the new information on the basis of which the Income-tax Officer reopened the assessments. The Tribunal has pointed out that the assessee-company could not show even at the time of hearing before it any letter or document by which the fact of utilisation of part of the bank overdraft for investments in chloramphenicol project was specifically brought to the notice of the Income-tax Officer. The Income-tax Officer in the course of the proceedings for the assessment year 1969-70 for the first time came to know of this fact and this amounted to “information” on the basis of which the Income-tax Officer had reason to believe that the assessee’s income had escaped assessment.
19. The question, therefore, is whether the Income-tax Officer had allowed the entire amount of interest on the bank overdraft as business expenditure with full knowledge that a part of the overdraft account was being utilised for the chloramphenicol project. This again is a question of fact. The Tribunal has held that the Income-tax Officer came to know of this fact in the course of the assessment proceedings for the assessment year 1969-70 and not earlier. Therefore, this must be held to constitute information within the meaning of Section 147(b).
20. It is well-settled that the Income-tax Officer cannot reopen an assessment on the basis of mere change of opinion. But if the change of opinion is occasioned by discovery of any new fact which could have been discovered in the course of the original assessment proceedings but was not actually found out, it cannot be said that the reopening was on mere change of opinion.
21. The Supreme Court, in the case of Indian & Eastern Newspaper Society v. CIT [1979] 119 ITR 996, held that “an error discovered on a reconsideration of the same material (and no more) does not give him power to reopen an assessment”. But this is not a case of reconsideration of the same material already on record. A portion of the overdraft account was being utilised for the new chloramphenicol project. This fact was not brought
to the notice of the Income-tax Officer in the course of the assessment proceedings for the assessment years 1966-67 to 1968-69. This fact came to the knowledge of the Income-tax Officer only in the course of the assessment for the assessment year 1969-70. The reopening was done not on the ground that the Income-tax Officer had erroneously allowed the entire interest on bank overdraft account with full knowledge of all the facts in the course of the original assessment proceedings. It may be that this fact could have been discovered by the Income-tax Officer on enquiry in the course of the original assessment proceedings. But it cannot be said that the Income-tax Officer had mistakenly allowed the proportionate interest on bank overdraft account with full knowledge of the fact that a part of the overdraft was being utilised for the cholramphenicol project. The finding of the Tribunal was that the Income-tax Officer had new information in his possession for reopening of the assessment under Section 147(b). It cannot be said that the Tribunal’s decision is erroneous in law in any way.
22. The third question raised in this reference has been held against the assessee in the case of Waldies Ltd. v. CIT .
23. In the premises, questions Nos. 1, 2 and 3 raised in this reference are answered in the affirmative and in favour of the Revenue.
24. Each party will pay and bear its own costs.
Dipak Kumar Sen, J.
25. I agree.