The ACIT, Circle-2, Bhavnagar V. M/s. Shantamani Enterprises, Bhavnagar

ITA 2462/AHD/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5929 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 15-06-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 30-06-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B BEFORE SHRI MUKUL SHRAWAT, JUDICIAL MEMBER AND SHRI N.S.SAINI, ACCOUNTANT MEMBER DATE OF HEARING: 17.06.10 DRAFTED ON: 17.06.10 ITA NO.2462/AHD/2008 ASSESSMENT YEAR : 2005-06 ASSTT. C.I.T., CIRCLE-2, BHAVNAGAR, AAYKAR BHAVAN, NR. JASONATH CHOWK, BHAVNAGAR- 364001 VS. M/S. SHANTAMANI ENTERPRISES, NANALAL CHAMBERS, LOKHAND BAZAR, BHAVNAGAR. PAN/GIR NO. : AAHFS47241 (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI K. MADHUSUDAN SR. D.R. RESPONDENT BY: SHRI TUSHAR P. HEMANI O R D E R PER N.S.SAINI , ACCOUNTANT MEMBER :- THIS IS AN APPEAL FILED BY THE REVENUE AGAINST TH E ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)- XX, DA TED 17-3- 2008. 2. THE SOLE GROUND OF APPEAL RAISED IN THIS APPEAL BY THE REVENUE IS THAT :- 1. THE LD. CIT(A) ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING THE EXPENSES INCURRED BY THE ASSES SEE FOR ITS SHIP BREAKING ACTIVITIES AMOUNTING TO RS.19,53, 665/- INCLUDING DEPRECIATION OF RS.3,14,880/-. - 2 - 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE , THE ASSE SSEE CLAIMED EXPENDITURE OF RS.19,53,665/- IN RESPECT OF SHIP BR EAKING BUSINESS WHICH WAS DISALLOWED BY THE LEARNED ASSESSING OFFIC ER ON THE GROUND THAT ASSESSEE HAS CLOSED SHIP BREAKING BUSIN ESS AND THE ASSESSEE HAS NOT CARRIED OUT ANY SHIP BREAKING BUSI NESS DURING THE YEAR UNDER CONSIDERATION AS WELL AS UPTO THE FINANC IAL YEAR 2007-08. 4. ON APPEAL THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE DISALLOWANCE AND ALLOWED THE CLAIM OF T HE ASSESSEE BY OBSERVING AS UNDER:- I HAVE CONSIDERED THE FACTS OF THE CASE, LEARNED ASSESSING OFFICERS FINDINGS AND OBSERVATIONS IN TH E ASSESSMENT ORDER, DETAILED SUBMISSIONS/ARGUMENTS OF THE LEARNED AUTHORISED REPRESENTATIVE WITH CASE LAW. IT IS ADMITTED THAT DURING THE YEAR UNDER CONSIDERATION, THERE WAS NO RECEIPT FROM SHIP BREAKING BUSINESS AND EXPENSES WE RE CLAIMED IN RESPECT OF PAYMENT MADE TO GUJARAT MARITIME BOAR D, STAFF EXPENSES, REPAIR AND MAINTENANCE FROM THE INCOME OF INTEREST AND DISCOUNTS. HOWEVER, THE TERM CLOSURE OF BUSIN ESS HAS WIDER IMPLICATION AND NON-RECEIPT OF ANY AMOUNT DUR ING A PARTICULAR PREVIOUS YEAR MAY NOT BE THE FINAL PRO OF FOR COMING TO A CONCLUSION THAT BUSINESS WAS CLOSED. THE ASSES SEES BUSINESS IS UNIQUE IN NATURE AND PURCHASE OF ONE S HIP MAY PROVIDE ACTIVITY OVER A PERIOD OF MORE THAT ONE PRE VIOUS YEAR. AT THE SAME TIME, NON-PURCHASE OF SHIP MAY CAUSE AB SENCE OF BUSINESS IN A PARTICULAR YEAR. IT WAS A CASE OF LU LL IN BUSINESS AND NOT A CASE OF GOING OUT OF BUSINESS. IT IS NO T NECESSARY THAT A BUSINESS TO BE IN EXISTENCE SHOULD WORK ALL THE TIME. THERE MAY BE LONG INTERVALS OF INACTIVITY AND THE C ONCERN MAY STILL BE A GOING CONCERN, THOUGH IT MAY FOR SOME TI ME BE QUIET AND DORMANT. THE MERE FACT THAT A BUSINESSMAN HAS N OT PURCHASED SHIP FOR DISMANTLING AND THE BUSINESS HAS FOR SOME TIME BEEN IN THAT SENSE DORMANT WOULD NOT MEAN THAT IT HAS CEASED TO EXIST IF THE ASSESSEE CONTINUES TO MAINTA IN AN ESTABLISHMENT AND INCUR EXPENSES IN THE EXPECTATION THAT WORK - 3 - WOULD COME AND THE BUSINESS WOULD BE SUCCESSFUL. HO W LONG HE SHALL REMAIN IN THE HOPE AND IN WHAT MANNER HE M UST CARRY ON HIS WORK TO GAIN SUCCESS IS PRIMARILY HIS OWN CO NCERN. THE MERE FACT THAT FOR SOME TIME HE IS NOT ABLE TO PURC HASE A SHIP WHICH HE SET OUT TO DO SHOULD NOT DISQUALIFY HIM FR OM PLEADING THAT THE EXPENDITURE THAT HE HAD INCURRED WAS EXPEN DED FOR THE PURPOSE OF HIS BUSINESS. FROM THE DETAILS OF EXPENSES FILED BY THE APPELLANT , INCURRED TOWARDS ADMINISTRATIVE OFFICE, PLOT RENT P AID TO THE G.M.B. TELEPHONE AND ELECTRIC EXPENSES FOR MAINTAIN ING OFFICE, BANK CHARGES FOR RENEWING LETTER OF CREDIT, LEGAL A ND PROFESSIONAL FEE AND FINANCIAL CHARGES FOR CAR, IT CAN SAFELY BE SAID THAT THESE EXPENSES ARE DIRECTLY RELATED TO TH E BUSINESS OF THE APPELLANT. IT IS ALSO CLARIFIED THAT DEPRECIATI ON HAS BEEN CLAIMED ONLY ON CAR AND OFFICE EQUIPMENTS. ALSO THI S YEAR NO OTHER BUSINESS HAS BEEN DONE BY THE APPELLANT. IN VIEW OF THE FACTS NARRATED IN THE ASSESSMENT ORDER AND CONSIDER ING THE PECULIAR NATURE OF BUSINESS AND ALSO THE DECISIONS OF THE ITAT AND HIGH COURTS RELIED UPON BY THE LD. A.R., I AM O F THE VIEW THAT THE A.O. WAS NOT JUSTIFIED IN DISALLOWING THE EXPENSES INCURRED BY THE APPELLANT FOR ITS SHIP BREAKING ACT IVITY. THE ADDITION MADE BY DISALLOWING THE EXPENSES IS THEREF ORE, DELETED. 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED U PON THE ORDER OF THE LEARNED ASSESSING OFFICER AND SUBMITTE D THAT AS THE ASSESSEE HAS NOT CARRIED OUT ANY BUSINESS DURING TH E YEAR UNDER CONSIDERATION OF SHIP BREAKING AND AS BUSINESS WAS ALSO NOT CARRIED OUT BY THE ASSESSEE TILL 31.03.2008, THE ABOVE FACT CLEARLY SHOWS THAT THE ASSESSEE HAS CLOSED DOWN THE SHIP BREAKING BUSI NESS. AS THE ASSESSEE WAS NOT IN SHIP BREAKING BUSINESS, THE LEA RNED ASSESSING OFFICER WAS JUSTIFIED IN DISALLOWING EXPENSES RELAT ING TO THE CLOSED BUSINESS. 6. ON THE OTHER HAND, THE LEARNED AUTHORISED REPRES ENTATIVE OF THE ASSESSEE SUPPORTED THE ORDER OF THE LEARNED COM MISSIONER OF - 4 - INCOME TAX(APPEALS) AND FILED COPY OF AUDITED PROFI T & LOSS ACCOUNT FOR THE ASSESSMENT YEAR 2009-10 AND POINTED OUT THEREFROM THAT OLD SHIP VESSEL WAS PURCHASED DURING THE YEAR BY THE ASSESSEE WHICH CONCLUSIVELY PROVES THAT THE ASSESSEE HAD NOT CLOSED THE SHIP BREAKING BUSINESS. ONLY DUE TO LULL IN THE MARKET, NO BUSINESS COULD BE SECURED DURING THE INTERVENING PERIOD INCLUDING THE YEAR UNDER CONSIDERATION. 7. WE FIND THAT NO SPECIFIC DEFECT OR ERROR IN THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) COULD B E POINTED OUT BY THE LEARNED DEPARTMENTAL REPRESENTATIVE . IT IS ALSO OBSERVED THAT NO MATERIAL WAS BROUGHT ON RECORD BY THE REVENUE TO SHOW THAT THE ASSESSEE ACTUALLY CLOSED DOWN THE SHIP BREAKING BUS INESS AND WAS NOT IN THAT BUSINESS DURING THE YEAR UNDER CONSIDERATIO N LIKE SALE OF SUBSTANTIAL PART OF MACHINERIES, ETC. REQUIRED FOR THAT BUSINESS OR RETRENCHED THE STAFF AND LABOURS WHICH WERE NECESSA RILY REQUIRED FOR SHIP BREAKING BUSINESS OR OTHER MATERIAL OF LIKE NA TURE. IN OUR CONSIDERED OPINION, MERELY BECAUSE OF NOT SECURING OF ANY BUSINESS EITHER DURING ONE YEAR OR IN A PERIOD OF THREE OR F OUR YEARS COULD NOT CONCLUSIVELY PROVE THAT THE ASSESSEE HAS CLOSED THA T BUSINESS. IN THE INSTANT CASE, THE LEARNED COMMISSIONER OF INCOME TA X(APPEALS) FOUND THAT THE ASSESSEE WAS MAINTAINING ALL THE INF RASTRUCTURE WHICH WAS REQUIRED FOR SHIP BREAKING BUSINESS COULD NOT B E CONTROVERTED BY THE REVENUE. THE ARGUMENT OF THE ASSESSEE THAT DUE TO LULL IN BUSINESS AND DUE TO PECULIAR NATURE OF BUSINESS IN WHICH THE ASSESSEE WAS ENGAGED HE COULD NOT SECURE ANY BUSINESS FOR FEW YE ARS IS A PLAUSIBLE EXPLANATION WHICH CANNOT BE REJECTED WITHOUT BRININ G ANY COGENT MATERIAL ON RECORD. IN VIEW OF THE ABOVE, WE DO NO T FIND ANY GOOD - 5 - REASON TO INTERFERE WITH THE ORDER OF THE LEARNED C OMMISSIONER OF INCOME TAX(APPEALS). IT IS CONFIRMED AND THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 18 TH DAY OF JUNE, 2010. SD/- SD/- (MUKUL SHRAWAT ) ( N.S. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; ON THIS 18 TH DAY OF JUNE, 2010 PARAS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-XX, AHMEDABAD, 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD DATE INITIALS 1. DRAFT DICTATED ON 18.06.2010 --------------- ---- 2. DRAFT PLACED BEFORE AUTHORITY 18.06.2010 ----- -------------- 3. DRAFT PROPOSED & PLACED 18.06.2010 ------------ ------- JM BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED 18.06.2010 ----------- -------- JM BY SECOND MEMBER 5. APPROVED DRAFT COMES TO P.S 18.06.2010 --------- ----------- 6. KEPT FOR PRONOUNCEMENT ON 18.06.2010 ---------- ---------- 7. FILE SENT TO THE BENCH CLERK ---------------- -------------------- 8. DATE ON WHICH FILE GOES TO THE ---------------- -------------------- 9. DATE OF DISPATCH OF ORDER ---------------- --- ------------------