DCIT, Kollam V. M/s Punalur Paper Mills Ltd, Punalur

ITA 177/COCH/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61356 (ITAT-COCHIN)
• Duration Of Justice: 2 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-04-2012
• Appeal Filed By: Department
• Bench Allotted: DB
• Next Hearing Date: 28-03-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 11-03-2010
• Court: TRIBUNAL
• Department Lawyers: VIJAYAPRABHA
• Assessee Lawyers: RADHESH BHAT
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T.A. NO. 177/COCH/2010 ASSESSMENT YEAR : 2005-06 DY. COMMISSIONER OF INCOME- TAX, CIRCLE-1, KOLLAM M/S. PUNALUR PAPER MILLS LTD., PUNALUR.[PAN : AADCP 2570Q] (REVENUE-APPELLANT) (ASSESSEE- RESPONDENT) REVENUE BY SMT. VIJAYAPRABHA, JR. DR ASSESSEE BY SHRI RADHESH BHAT, CA DATE OF HEARING 28/03/2012 DATE OF PRONOUNCEMENT 03/04/2012 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DATED 03-11-2009 PASSED BY THE LD. CIT(A)-I, TRIVANDRUM AND IT RELAT ES TO THE ASSESSMENT YEAR 2005-06. 2. THE ONLY ISSUE URGED FOR OUR CONSIDERATION IS WH ETHER THE LD. CIT(A) IS JUSTIFIED IN HOLDING THAT THERE WAS ONLY A TEMPORARY LULL IN THE BUSINESS ACTIVITY OF THE ASSESSEE AND CONSEQUENTLY, THE ASSESSEE IS ENTITLED TO CLAIM BUS INESS EXPENDITURE AND DEPRECIATION AGAINST INCOME FROM OTHER SOURCES. 3. THE FACTS RELATING TO THE ISSUE ARE STATED IN BR IEF. THE ASSESSEE-COMPANY FILED ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION D ECLARING A LOSS OF RS. 77,42,528/-. THE ASSESSEE-COMPANY WAS ENGAGED IN THE MANUFACTURE AND SALE OF PAPER. HOWEVER, IT COMPLETELY CLOSED DOWN ITS MANUFACTURING ACTIVITY I N THE YEAR 1986 AND ALL ITS PROPERTIES ITA NO. 177/COCH/ 2010 2 WERE TAKEN OVER BY THE GOVERNMENT APPOINTED OFFICIA L RECEIVER IN 1986 ITSELF AND THE POSITION CONTINUES TILL DATE. 4. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSE E HAD CLAIMED A SUM OF RS. 92,86,650/- AS BUSINESS LOSS, WHICH CONSISTED OF AD MINISTRATIVE AND OTHER EXPENSES INCURRED IN THE PAPER UNIT. THE ASSESSING OFFICER DISALLOWED THE SAID CLAIM ON THE GROUND THAT THE ASSESSEE DID NOT CARRY ON ANY BUSINESS ACT IVITY. WHILE DOING SO, HE REJECTED THE CONTENTION OF THE ASSESSEE THAT THERE WAS ONLY TEM PORARY LULL IN BUSINESS CARRIED ON BY IT. 5. IN APPEAL FILED BY THE ASSESSEE, THE LD. CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE BY FOLLOWING THE DECISION OF ITAT IN ASSESSEE'S OWN CASE IN I.T.A. NO. 23-26/COCH/2003 RELATING TO THE ASSESSMENT YEARS 1987-88 TO 1990-91 . AGGRIEVED, THE REVENUE IS IN APPEAL. 6. THE LD. DR SUBMITTED THAT THE ASSESSEE HAD CLOSE D DOWN ITS BUSINESS ACTIVITY IN 1986 AND ABOUT 30 YEARS HAVE PASSED SINCE THAT DATE . THE ABOVE SAID GAP OF 30 YEARS CANNOT BE CONSIDERED AS TEMPORARY LULL IN THE BUS INESS OF THE ASSESSEE AND HENCE THE ASSESSING OFFICER WAS RIGHT IN MAKING THE IMPUGNED DISALLOWANCE. ON THE CONTRARY, THE LD. AR SUBMITTED THAT THE PRESENT ISSUE IS SQUARELY COVERED BY THE DECISION OF THE HONBLE ITAT IN ASSESSEE'S OWN CASE WHICH WAS REFER RED TO BY THE LD. CIT(A). HE FURTHER SUBMITTED THAT THE VERY SAME VIEW WAS FOLLO WED BY THIS BENCH IN ASSESSEE'S OWN CASE FOR THE ASSESSMENT YEAR 2004-05 IN I.T.A. NO. 556/COCH/2009. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREFULL Y PERUSED THE MATERIAL ON RECORD. THERE CANNOT BE ANY DISPUTE THAT THE QUESTION WHETH ER THE DISCONTINUANCE OF BUSINESS ACTIVITY OF THE ASSESSEE EITHER DUE TO TEMPORARY L ULL OR OTHERWISE IS A QUESTION OF FACT AND THE SAME IS REQUIRED TO BE CONSIDERED EVERY YEA R ON THE BASIS OF THE FACTS AND CIRCUMSTANCES PREVAILING IN THAT YEAR. ACCORDINGLY , WE ARE OF THE VIEW THAT THE DECISION RENDERED BY THE TRIBUNAL IN THE EARLIER YEARS CANNO T HAVE BINDING EFFECT IN SUBSEQUENT YEARS. THE UNDISPUTED FACTS ARE THAT THE ASSESSEE CLOSED DOWN ITS BUSINESS IN THE YEAR ITA NO. 177/COCH/ 2010 3 1986. HENCE, WHILE CONSIDERING THE CLAIM OF THE ASS ESSEE FOR THE YEARS ENDING 31.3.1987 TO 31.3.90, THE TRIBUNAL HELD THAT THERE WAS TEMPO RARY LULL IN THE BUSINESS AS THE GAP BETWEEN THE YEAR OF CLOSURE AND THE YEARS UNDER CON SIDERATION AT THAT POINT OF TIME WAS VERY NARROW. HOWEVER, WE ARE CONCERNED WITH THE AS SESSMENT YEAR 2005-06 AND WE HAVE TO CONSIDER THE FACTS AND CIRCUMSTANCES PREVAILING AS ON 31-03-2005. BY THAT DATE, ABOUT 30 YEARS HAVE PASSED AND WE ARE IN AGREEMENT WITH L D D.R THAT THE SAID GAP OF 30 YEARS CANNOT BE CONSIDERED AS A TEMPORARY LULL IN THE BUS INESS ACTIVITY CARRIED ON BY THE ASSESSEE. THOUGH THE LD. AR SUBMITTED THAT STEPS A RE BEING TAKEN TO REVIVE THE BUSINESS WITHIN SIX MONTHS, YET WE ARE UNABLE TO ACCEPT HIS CONTENTION FOR WANT OF SUPPORTING MATERIALS. ACCORDINGLY, IN OUR VIEW, THE LD. CIT(A ) WAS NOT CORRECT IN PLACING RELIANCE ON THE DECISION OF THE TRIBUNAL RELATING TO ASSESSM ENT YEARS 1987-88 TO 1990-91. ACCORDINGLY, WE REVERSE THE ORDER OF THE LD. CIT(A) AND RESTORE THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLO WED PRONOUNCED ACCORDINGLY ON 03-04-2012 SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 3RD APRIL, 2012 GJ COPY TO: 1.M/S. PUNALUR PAPER MILLS, PUNALUR.. 2.THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-1, KOLLAM. 3. THE COMMISSIONER OF INCOME-TAX (APPEALS)-I, TRIV ANDRUM. 4. THE COMMISSIONER OF INCOME-TAX, TRIVANDRUM.. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE . BY ORDER (ASSISTANT REGISTRAR) I.T.A.T, COCHIN ITA NO. 177/COCH/ 2010 4