- (1.) By this reference application, the following questions have been referred for our opinion : "(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in allowing interest on the loan taken from Grindlays Bank ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that coal mines business of the asses-see-company constituted the same business and in that view of the matter in allowing the interest on loan from Grindlays Bank as deduction ?"
(2.) The assessee was a colliery owner whose right, title and interest in the mines had been acquired after the enactment of the Coal Mines (Nationalisation) Act, 1973. During the assessment years 1975-76, 1977-78 and 1978-79, the assessee-company incurred liabilities towards expenditure of interest to the Grindlays Bank of Rs. 2,91,980, Rs. 7,71,851 and Rs. 7,71,851, respectively. The assessee claimed before the Assessing Officer that in view of its agreement with the bank and in view of the legal suit filed by the bank in the High Court, the company had incurred the liability to pay the interest as per agreement. The company debited its profit and loss account at the same rate, i.e., four per cent, per annum. It was also brought to the notice of the Assessing Officer that the assessee is not only carrying on the activities of coal mining but also indulged in boring, etc., and they all constitute one and the same business. Therefore, whatever loan has been obtained, though for one line of business, if that is closed, even after closure of that business, the assessee's business continued and it carried on some other activities and the interest payable on the loans obtained for the purpose of carrying on business, the assessee is entitled for deduction of that interest. The claim of the assessee was not accepted by the Assessing Officer. In appeal before the Commissioner, the Commissioner of Income-tax (Appeals) was satisfied from the evidence produced before him that the assessee was carrying on boring business along with its mining business and the activities of boring business continued even after the nationalisation of mines.
(3.) The Commissioner of Income-tax (Appeals) was also satisfied in respect of commonness of management, commonness of accounts and interlacing of various activities of the appellant company and the fund receipts from the different activities were being deposited in the same bank accounts and were also being utilised without any reservations for other activities of the assessee-company. The Commissioner has also inspected the cash book produced before him which shows the commonness of the funds concerned and also intermingling of the funds as well as the activities of the assessee-company. Therefore, in view of the said factual aspect and of the decision of the Supreme Court in the case of B.R. Ltd. v. V.P. Gupta, CIT, the Commissioner directed the Assessing Officer to allow the interest as claimed by the assessee.;