Whitefield chemtech Private Limited, Bangalore V. ACIT, Bangalore

ITA 1210/BANG/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80670 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 24-07-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 21-09-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR SUNDARESAN
• Assessee Lawyers: ASHOK A KULKARNI
• Keywords: Business income; Depreciation; Business expenditure; Carry forward of business losses; Unabsorbed depreciation
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH B BEFORE SHRI RAJPAL YADAV , JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER I.T.A. NO . 1210 / BANG /20 1 2 ( ASSESSMENT YEAR : 200 6 - 07 ) WHITEFIELD CHEMTECH PVT. LTD., 1, MAIN ROAD, NR. WHIT EFIELD RAILWAY STATION, WHITE FIELD, BANGALORE - 560 066 . . APPELLANT VS. ASST. COMMISSIONER OF INCOME TAX, CIRCLE 12(5), BA NGALORE . .. RESPONDENT. APPELLANT BY : SHRI ASHOK A KULKARNI, ADVOCATE. RESPONDENT BY : DR. SUNDARESAN, SR. D.R. DATE OF H EARING : 24.07.2014. DATE OF P RONOUNCEMENT : 28.08 .2014. O R D E R PER S HRI JASON P. BOAZ : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF I NCOME TAX (APPEALS) - III, BANGALORE DT.27.6.2012 FOR ASSESSMENT YEAR 2006 - 07. 2. THE FACTS OF THE CASE, BRIEFLY, ARE AS UNDER : 2.1 THE ASSESSEE IS A COMPANY ENGAGED IN THE TRADING CHEMICAL GOODS. HOWEVER, DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD NOT CARRIED OUT ANY KIND OF TRADING ACTIVITY. THE ASSESSEE FILED THE RETURN OF INCOME FOR ASSESSMENT YEAR 2006 - 07 DECLARING A LOSS OF RS.21,17,144. THE RETURN OF INCOME WAS PROCESSED UNDER SECTION 143(1) OF INCOME TAX ACT, 1961 ( HEREINAFT ER REFERRED TO AS 'THE ACT') AND THE CASE WAS TAKEN UP FOR SCRUTINY. THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT BY ORDER DT.30.11.2008 DETERMINING 2 ITA NO.1210/BANG/2012 THE TOTAL INCOME AT RS.7,00,983. OUT OF THE TOTAL INTEREST INCOME OF RS.1,17,00,921, AN A MOUNT OF RS.1,09,99,938 WAS DIVIDEND INCOME WHICH WAS EXEMPT UNDER SECTION 10(34) OF THE ACT AND THE BALANCE OF RS.7,00,983 WAS TREATED AS INTEREST INCOME LIABLE FOR TAX. SINCE THE ASSESSEE DID NOT CARRY OUT ANY BUSINESS ACTIVITY IN THE PERIOD UNDER CONS IDERATION, THE ASSESSING OFFICER T REATED THE INTEREST INCOME AS INCOME FROM OTHER SOURCES AND DISALLOWED THE CLAIM OF BUSINESS EXPENSES MADE BY THE ASSESSEE. THE ASSESSING OFFICER ALSO DID NOT ALLOW THE CARRY FORWARD OF LOSSES AS THERE WAS NO BUSINESS OPERATIONS OF THE ASSESSEE DURING THE YEAR. 2.2 AGGRIEVED BY THE ORDER OF ASSESSMENT FOR ASSESSMENT YEAR 2006 - 07 DT.30.11.2008, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(APPEALS) III, BANGALORE. THE LEARNED CIT (APPEALS) DISPOSED OFF THE ASSE SSEE'S APPEAL BY ORDER DT.27.6.2012 ALLOWING THE ASSESSEE PARTIAL RELIEF. THE LEARNED CIT (APPEALS) UPHELD THE DECISION OF THE ASSESSING OFFICER IN TREATING THE INTEREST INCOME AS INCOME FROM OTHER SOURCES AND ALSO THE DECISION OF THE ASSESSING OFFICER IN DISALLOWING THE CLAIM OF EXPENSES. 3. AGGRIEVED B Y THE ORDER OF CIT(APPEALS) III, BANGALORE FOR ASSESSMENT YEAR 2006 - 07 DT.27.12.2012, THE ASSESSEE IS IN APPEAL BEFORE US, RAISING THE FOLLOWING GROUNDS : - 1. TREATMENT OF INTEREST INCOME AND OTH ER INCOME AS INCOME FROM OTHER SOURCES : RS.7,00,983. 1.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (APPEALS) ERRED IN UPHOLDING THE INTEREST INCOME AND OTHER INCOME AS INCOME FROM OTHER SOURCES INSTEAD OF P ROFITS & GAINS OF BUSINESS AND PROFESSION WITHOUT APPRECIATING THAT APPELLANT WAS ACTUALLY ENGAGED IN BUSINESS OF LENDING. 2. DISALLOWANCE OF EXPENDITURE INCURRED FOR PRESERVING AND MAINTAINING OF BUSINESS : RS.4,45,331. 2.1 ON THE FACTS AND I N THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (APPEALS) ERRED IN UPHOLDING THE DISALLOWANCE OF EXPENDITURE INCURRED FOR PRESERVING AND MAINTAINING OF BUSINESS AND FIXED ASSETS WITHOUT APPRECIATING THAT THE SAME WAS ALLOWABLE AS BUSINESS EXPE NDITURE U/S.37(1). 3. SET OFF OF UNABSORBED DEPRECIATION AND BROUGHT FORWARD BUSINESS LOSS. 3.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (APPEALS) ERRED IN DENYING SET OFF OF UNABSORBED DEPRECIATION AND BROUGHT FO RWARD BUSINESS LOSS. THE LEARNED CIT (APPEALS) OUGHT TO HAVE GIVEN APPROPRIATE DIRECTIONS TO VERIFY AND ALLOW SET OFF OF BROUGHT FORWARD UNABSORBED DEPRECIATION AND BUSINESS LOSS AGAINST INCOME FROM OTHER SOURCES. 4. DEDUCTION U/S.35D NOT ALLOWED : RS.3 6,900. 3 ITA NO.1210/BANG/2012 4.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (APPEALS) ERRED IN NOT ALLOWING DEDUCTION U/S.35D WITHOUT APPRECIATING THAT DEDUCTION UNDER SECTION 35D IS ALLOWABLE EVEN IF NO BUSINESS WAS CARRIED ON BY APPELLAN T. 5. THE APPELLANT CRAVES LEAVE TO ADD TO, ALTER, AMEND OR DELETE ANY GROUND OF APPEAL. 4.1 IN THE PROCEEDINGS BEFORE US, THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE ASSAILED THE ORDERS OF THE AUTHORITIES BELOW. IT WAS CONTENDED BY T HE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE THAT THOUGH THE ASSESSEE DID NOT HAVE OR CONDUCT ANY TRADING ACTIVITY DURING THE PERIOD UNDER CONSIDERATION, IT HAD UNDERTAKEN THE ACTIVITY OF MONEY LENDING AS A BUSINESS AND THEREFORE, THE INTEREST SHOU LD BE TREATED AS BUSINESS INCOME AND THE EXPENSES CLAIMED SHOULD BE ALLOWED AS BUSINESS EXPENSES. THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE ALSO CHALLENGED THE DECISION OF THE ASSESSING OFFICER IN DISALLOWING THE SET OFF AND CARRY FORWARD OF B USINESS LOSSES CLAIMED BY THE ASSESSEE. 4.2 PER CONTRA, THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORTED THE IMPUGNED ORDER OF THE LOWER AUTHORITIES AND PRAYED FOR THE DISMISSAL OF THE ASSESSEE'S APPEAL. 4.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AN D PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD, INCLUDING THE JUDICIAL DECISIONS CITED AND PLACED RELIANCE BY THE ASSESSEE. THE ISSUES RAISED IN THE VARIOUS GROUNDS OF APPEAL ARE DISPOSED OFF HEREUNDER IN SERIATUM. 5.0 GROUND NO.1 : TREATMENT OF INTEREST INCOME AND OTHER INCOME AS INCOME FROM OTHER SOURCES : RS.7,00,983. 5.1 IT IS NOT IN DISPUTE THAT THE ASSESSEE COMPANY DID NOT HAVE OR CARRY OUT ANY TRADING BUSINESS ACTIVITY IN THE PERIOD UNDER CONSIDERATION. IT IS A MAT TER OF RECORD THAT THE ASSESSEE EARNED INTEREST INCOME AND OTHER INCOME OF SIMILAR NATURE AGGREGATING TO RS.7,00,983, THE BREAKUP OF WHICH IS AS UNDER : - I) INTEREST ON OFCDS SUBSCRIBED IN THE GROUP COMPANY : RS.90,000. II) INTEREST ON INTERCOMPANY DEPO SITS TO GROUP COMPANY : RS.5,40,959. III) SUNDRY / CREDIT BALANCE WRITTEN OFF : RS.8,014. IV) DIVIDEND INCOME : RS. 14,010. V) RENTAL INCOME : RS.48,000. 4 ITA NO.1210/BANG/2012 OUT OF THE ABOVE, THE DIVIDEND INCOME OF RS.14,010 HAS BEEN HELD BY THE LEA RNED CIT (APPEALS) TO BE TAX FREE DIVIDEND AND HENCE THE AMOUNT IN DISPUTE BEFORE US IS RS.6,86,973 (I.E. RS.7,00,983 LESS RS.14,010). 5.2.1 THE LEARNED CIT (APPEALS) OBSERVED THAT THE INTEREST INCOME HAS BEEN EARNED FROM INTER - CORPORATE DEPOSITS GIV EN BY THE ASSESSEE TO ITS GROUP COMPANY AND THESE DEPOSITS WERE IN THE NATURE OF PLACEMENT OF EXCESS FUNDS IN THE GROUP COMPANY AND DOES NOT CONSTITUTE REGULAR BUSINESS ACTIVITY. SINCE THERE IS NO NEXUS BETWEEN THE EARNING OF INTEREST INCOME AND THE BUSIN ESS OF THE ASSESSEE, WHICH IS TRADING OF GOODS, THE CIT(APPEALS) HELD THAT SUCH INTEREST INCOME IS TO BE ASSESSED AS INCOME FROM OTHER SOURCES . 5.2.2 WITH REGARD TO THE SUNDRY CREDIT BALANCES WRITTEN OFF , THE LEARNED CIT (APPEALS) HAS RENDERED A FI NDING THAT THE AMOUNT IN QUESTION REPRESENT S LOAN CREDIT S , AND WOULD NOT QUALIFY AS TRADE CREDIT, SINCE THE ASSESSEE HAS DISCONTINUED ITS BUSINESS YEARS AGO, AND THEREFORE NOT LIABLE FOR THE CLAIM BEING APPLICABLE UNDER SECTION 41(1) OF THE ACT. 5.2.3 IN RESPECT OF RENTAL INCOME , THE LEARNED CIT (APPEALS), OBSERVED THAT THE INTENTION OF THE ASSESSEE IN LEASING OUT THE PROPERTY WAS TO EARN RENT, AS THERE WAS NO BUSINESS ACTIVITY CARRIED OUT BY THE ASSESSEE FOR THE LAST MANY YEARS. IN THIS VIEW OF TH E MATTER, THE LEARNED CIT (APPEALS) HELD THAT THE INCOME CANNOT BE TREATED AS BUSINESS INCOME BUT AS INCOME FROM HOUSE PROPERTY . WE HAVE EXAMINED THE FACTS OF THE CASE AND THE MATERIAL ON RECORD AND ARE IN AGREEMENT WITH THE ANALYSIS AND CONCLUSI ONS REVIVED AT BY THE LEARNED CIT (APPEALS). 5.3.1 INTEREST INCOME. WHILE IT HAS BEEN THE CONTENTION OF THE ASSESSEE THAT INTEREST INCOME IS BUSINESS INCOME AS THE ASSESSEE HAS SHOWN THIS INCOME TO BE FROM MONEY LENDING ACTIVITY; REVENUE S CON TENTION IS THAT THE INTEREST INCOME IS TO BE ASSESSED AS INCOME FROM OTHER SOURCES AS THE ASSESSEE HAD DISCONTINUED ITS BUSINESS ACTIVITIES FOR THE LAST MANY YEARS. 5.3.2 IT IS WELL SETTLED THAT INTEREST INCOME IS EITHER ASSESSED AS BUSINESS I NCOME OR AS INCOME FROM OTHER SOURCES DEPENDING UPON THE ACTIVITIES CARRIED ON BY THE ASSESSEE. IF THE INVESTMENT YIELDING INTEREST I S PART OF THE BUSINESS ACTIVITIES OF THE ASSESSEE, THE INTEREST 5 ITA NO.1210/BANG/2012 WOULD BE ASSESSABLE AS BUSINESS INCOME . BUT WHERE THE EARNING OF INTEREST INCOME IS INCIDENTAL TO AND NOT THE DIRECT OUTCOME OF THE BUSINESS CARRIED ON BY THE ASSESSEE, THE SAME WOULD BE ASSESSABLE AS INCOME FROM OTHER SOURCES . BUSINESS IMPLIES SOME SUBSTANTIAL AND SYSTEMATIC OR ORGANISED COURSE OF ACTIVITY WITH A PROFIT MOTIVE AND INTEREST GENERATED FROM SUCH ACTIVITY WOULD CONSTITUTE BUSINESS INCOME . IF NOT, IT WOULD BE INCOME FROM OTHER SOURCES . IT IS ALSO A WELL SETTLED PRINCIPLE THAT WHAT IS BUSINESS INCOME AND WHAT IS NOT BUSINESS INCOME HAS TO BE DETERMINED ON THE FACTS OF EACH CASE. 5.3.3 IN THE CASE ON HAND, THE MAIN ACTIVITY OF THE ASSESSEE IN TRADING ACTIVITY AND IT IS AN ADMITTED FACT THAT THE ASSESSEE COMPANY HAD CEASED ITS TRADING ACTIVITY MANY YEARS AGO. AS POINTED OUT BY T HE LEARNED CIT (APPEALS), THE INTEREST HAS BEEN EARNED FROM INTER - CORPORATE DEPOSITS MADE WITH GROUP COMPANY AND THE ASSESSEE HAS NOT BEEN ABLE TO BRING ON RECORD ANY MATERIAL EVIDENCE TO SHOW THAT ITS TRADING ACTIVITY CONSTITUTES SYSTEMATIC MONEY LENDING ACTIVITY. IN THE ABSENCE OF ANY CONCLUSIVE EVIDENCE, IT IS DIFFICULT TO ACCEPT A FEW LOANS ADVANCED TO GROUP CONCERNS CONSTITUTE REGULAR AND SYSTEMATIC BUSINESS ACTIVITY. IN THIS VIEW OF THE MATTER, WE CONCUR WITH THE ORDER OF THE LEARNED CIT (APPEALS) IN HOLDING THAT THE INTEREST INCOME EARNED BY THE ASSESSEE FROM INTER - CORPORATE DEPOSITS WITH GROUP CONCERNS DOES NOT CONSTITUTE BUSINESS INCOME AND HAS TO BE ASSESSED AS INCOME FROM OTHER SOURCES . 5.4 SUNDRY CREDIT BALANCES WRITTEN OFF. AS OBS ERVED BY THE LEARNED CIT (APPEALS), THE ASSESSEE IS ENTITLED TO CLAIM WRITE OFF OF TRADE CREDITS ONLY. IN THE CASE ON HAND, ADMITTEDLY THE BUSINESS ACTIVITY OF THE ASSESSEE HAS CEASED MANY YEARS BACK AND ADMITTEDLY THESE AMOUNTS ARE LOAN CREDITS AND NOT TRADE CREDITS. FURTHER, IT IS THE RESPONSIBILITY OF THE ASSESSEE TO ESTABLISH THAT THE IMPUGNED SUNDRY CREDIT BALANCES INVOLVED REPRESENT TRADE CREDITS RELATED TO THE DISCONTINUED BUSINESS OF THE ASSESSEE. IN THE ABSENCE OF ANY DETAILS IN THIS REGARD, T HE ONUS OF THE ASSESSEE TO DO SO IS NOT DISCHARGED. IN THIS VIEW OF THE MATTER, WE AGREE WITH THE DECISION OF THE LEARNED CIT (APPEALS) THAT SUCH WRITE OFF CANNOT BE ALLOWED AS BUSINESS EXPENDITURE. 6 ITA NO.1210/BANG/2012 5.5 RENTAL INCOME IT IS AN UNDISPUTED FACT TH AT NO BUSINESS ACTIVITY IS BEING CARRIED OUT BY THE ASSESSEE FOR MANY YEARS AND THE BUILDING PREMISES IN QUESTION HAS BEEN LEASED OUT FOR THE PURPOSE OF EARNING RENT AND NOT FOR ANY BUSINESS ACTIVITY. AS SUCH, THIS RENTAL INCOME CANNOT BE TREATED AS BUSI NESS INCOME AND HAS BEEN CORRECTLY HELD TO BE ASSESSABLE AS INCOME FROM HOUSE PROPERTY BY THE AUTHORITIES BELOW. WE ACCORDINGLY DISMISS GROUND NO.1 RAISED BY THE ASSESSEE. 6. GROUND NO.2 : DISALLOWANCE OF EXPENDITURE : RS.4,45,331. 6.1 IN T HE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS NOT CARRIED OUT ANY BUSINESS ACTIVITY AND ASSESSED THE INTEREST INCOME AS INCOME FROM OTHER SOURCES . AFTER HAVING COME TO THE CONCLUSION THAT THE ASSESSEE WAS ADM ITTEDLY NOT CARRYING ON ANY BUSINESS ACTIVITY FOR THE LAST MANY YEARS, THE ASSESSING OFFICER HELD THAT THE EXPENSES CLAIMED AS BUSINESS EXPENDITURE CANNOT BE ALLOWED AND THEREFORE DISALLOWED THE ASSESSEE'S CLAIM. 6.2 THE LEARNED CIT (APPEALS) AGREED W ITH THE FINDING OF THE ASSESSING OFFICER THAT THE INTEREST INCOME CONSTITUTES INCOME FROM OTHER SOURCES . THE LEARNED CIT (APPEALS) CONSEQUENTLY HELD THAT ONLY THOSE EXPENSES ALLOWABLE UNDER SECTION 57(III) OF THE ACT CAN BE ALLOWED AS EXPENDITURE AND DI SALLOWED THE OTHER EXPENSES CLAIMED BY THE ASSESSEE AS BUSINESS EXPENDITURE. AS WE HAVE CONCURRED WITH AND UPHELD THE DECISION OF THE LEARNED CIT (APPEALS) IN HOLDING THAT INTEREST INCOME HAS TO BE ASSESSED AS INCOME FROM OTHER SOURCES , THE EXPENSES CL AIMED AS BUSINESS EXPENDITURE BY THE ASSESSEE ARE LIABLE TO BE DISALLOWED AND WE DISALLOW THE SAME. CONSEQUENTLY, REVENUE S GROUND AT S.NO.2 IS DISMISSED. 7. GROUND NO.4: D ISALLOWANCE OF EXPENSES CLAIMED AS DEDUCTION U/S.35D OF THE ACT : RS. 36,900. 7.1 IN ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER CAME TO THE FINDING OF FACT THAT ADMITTEDLY THE ASSESSEE WAS NOT DOING ANY BUSINESS ACTIVITY FOR THE LAST MANY YEARS AND HAD ASSESSED THE INTEREST INCOME EARNED BY IT AS INCOME FROM OTHER SOURCES . AFTER HAVING HELD THAT THE ASSESSEE ADMITTEDLY DOES NOT HAVE ANY BUSINESS ACTIVITY, THE ASSESSING OFFICER HELD 7 ITA NO.1210/BANG/2012 THAT THE EXPENSES CLAIMED BY THE ASSESSEE AS BUSINESS EXPENDITURE CANNOT BE ALLOWED AND DISALLOWED THE SAME. 7.2 THE LEARNED CIT (APPEALS ) AGREED WITH THE FINDING OF THE ASSESSING OFFICER THAT THE INTEREST INCOME CONSTITUTES INCOME FROM OTHER SOURCES . THE LEARNED CIT (APPEALS) CONSEQUENTLY HELD THAT ONLY THOSE EXPENSES ALLOWABLE UNDER SECTION 57(III) OF THE ACT CAN BE ALLOWED AS EXPENDIT URE AND DISALLOWED THE OTHER EXPENSES CLAIMED BY THE ASSESSEE AS BUSINESS EXPENDITURE. AS WE HAVE CONCURRED WITH AND UPHELD THE DECISION OF THE LEARNED CIT (APPEALS) IN HOLDING THAT INTEREST INCOME HAS TO BE ASSESSED AS INCOME FROM OTHER SOURCES , THE E XPENSES CLAIMED AS BUSINESS EXPENDITURE BY THE ASSESSEE U/S. 35D OF THE ACT ARE LIABLE TO BE DISALLOWED AND WE DISALLOW THE SAME. CONSEQUENTLY, REVENUE S GROUND AT S.NO.4 IS DISMISSED. 8. GROUND NO.3 : SET OFF OF UNABSORBED DEPRECIATION AND BROUGHT FORWARD BUSINESS LOSS . 8.1 IN THIS ORDER OF ASSESSMENT FOR THE IMPUGNED ASSESSMENT YEAR, THE ASSESSING OFFICER MENTIONED THAT THE ASSESSEE WILL NOT BE ALLOWED TO CARRY FORWARD THE LOSSES ARRIVED AT IN THE CURRENT ASSESSMENT YEAR 2006 - 07 AS THERE WAS NO BUSINESS OPERATIONS CARRIED OUT BY THE ASSESSEE. THE LEARNED CIT (APPEALS) UPHELD THIS DECISION OF THE ASSESSING OFFICER. 8.2 THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE CONTENDS THAT THE ASSESSEE HAS BEEN CARRYING OUT BUSINESS OPERATIO NS / ACTIVITY AND IS THEREFORE ENTITLED TO SET OFF AND CARRY FORWARD OF UNABSORBED DEPRECIATION AND BUSINESS LOSS. IT IS CONTENDED THAT EVEN IF THE ASSESSEE'S INCOME IS ASSESSED AS INCOME FROM OTHER SOURCES , IT IS STILL ENTITLED TO SET OFF OF UNABSORBE D BUSINESS LOSSES. IT WAS ALSO CONTENDED THAT UNABSORBED DEPRECIATION OUGHT TO BE ALLOWED EVEN IF NO BUSINESS ACTIVITY WAS CARRIED ON BY THE ASSESSEE. IN SUPPORT OF THIS PROPOSITION, THE ASSESSEE PLACED RELIANCE ON THE FOLLOWING JUDICIAL DECISIONS : - I) ADDL. CIT V KAPILA TEXTILES (P) LTD. (129 ITR 458) (KAR) II) CIT V GTM SYNTHETICS LTD. (2012) 347 ITR 458) (P&H) 8 ITA NO.1210/BANG/2012 IT WAS SUBMITTED THAT IN THE AFORE CITED CASES, IT WAS HELD THAT CARRY FORWARD AND SET OFF IS NOT SUBJECT TO THE CONDITION THAT BUSINE SS MUST HAVE BEEN CARRIED ON DURING THE RELEVANT PREVIOUS YEAR AND THE ASSESSEE IS ENTITLED TO SET OFF DEPRECIATION AGAINST INCOME FROM OTHER HEADS. 8.3.1 WE HAVE HEARD BOTH THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE AND THE LEARNED DEPAR TMENTAL REPRESENTATIVE FOR REVENUE AND PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD INCLUDING THE JUDICIAL DECISIONS CITED. IT IS NOT IN QUESTION THAT CARRY FORWARD AND SET OFF OF BUSINESS LOSS AND DEPRECIATION IS NOT SUBJECT TO THE BUSINESS AC TIVITY DURING THE YEAR UNDER CONSIDERATION. IT IS ALSO NOT IN QUESTION THAT SUCH SET OFF CAN BE MADE AGAINST THE INCOME FROM OTHER HEADS OF INCOME. AS OBSERVED BY THE LEARNED CIT (APPEALS), THE LAW ALLOWS CARRY FORWARD OF UNABSORBED DEPRECIATION TILL THE EXISTENCE OF A POSITIVE WDV OF THE DEPRECIABLE ASSETS AND CARRY FORWARD OF BUSINESS LOSS FOR THE SPECIFIC PERIOD. 8.3.2 THE ISSUE IN THE CASE ON HAND IS HOWEVER, WHETHER THERE ARE ANY VALID BUSINESS LOSSES AND UNABSORBED DEPRECIATION ENTITLED FOR BEI NG CARRIED FORWARD AND SET OFF. AS POINTED OUT BY THE LEARNED CIT (APPEALS), THE ORDER OF THE ASSESSING OFFICER IS NOT RELATED TO THE CARRY FORWARD OF LOSSES OF EARLIER YEARS BUT ONLY OF CURRENT YEAR S LOSSES. FOR THE CURRENT YEAR UNDER CONSIDERATION, I .E. ASSESSMENT YEAR 2006 - 07, IT HAS ALREADY BEEN HELD BY US THAT THE ASSESSEE DOES NOT HAVE ANY BUSINESS ACTIVITY AND THE INCOME EARNED IS TO BE ASSESSED AS INCOME FROM OTHER SOURCES. . SINCE THERE WAS NO BUSINESS ACTIVITY CARRIED ON BY THE ASSESSEE IN T HE YEAR UNDER CONSIDERATION, THE QUESTION OF ALLOWING DEPRECIATION ON BUSINESS ASSETS ALSO DOES NOT ARISE. THEREFORE, THERE IS NO VALID CLAIM OF BUSINESS EXPENDITURE AND DEPRECIATION DURING THE YEAR UNDER CONSIDERATION AND HENCE THE QUESTION OF CARRY FORW ARD AND SET OFF OF CURRENT YEAR S BUSINESS LOSS AND UNABSORBED DEPRECIATION DOES NOT ARISE. IN THIS VIEW OF THE MATTER, WE CONCUR WITH THE ORDER OF THE LEARNED CIT (APPEALS) IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING THE CLAIM OF SET OFF AND CARRY FORWARD OF BUSINESS LOSSES AND 9 ITA NO.1210/BANG/2012 DEPRECIATION CLAIMED BY THE ASSESSEE. WE, CONSEQUENTLY, DISMISS THE GROUND AT S.NO.3 RAISED BY THE ASSESSEE. 9. IN THE RESULT, THE ASSESSEE'S APPEAL FOR ASSESSMENT YEAR 2006 - 07 IS DISMISSED. OR DER PRONOUNCED IN THE OPEN COURT ON 28 TH AUG., 201 4 . SD/ - SD/ - ( RAJPAL YADAV ) ( JASON P BOAZ ) JUDICIAL MEMBER ACCOUNTANT MEMBER *REDDY GP COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE. (TRUE COPY) BY ORDER ASST. REGISTRAR, ITAT, BANGALORE