M/s. Karnavati Export Pvt. Ltd., Ahmedabad V. The Income Tax officer, Ward-4(2), Ahmedabad

ITA 2749/AHD/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 9733 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-01-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 19-11-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 25-11-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: LALA PHILIPS
• Section: 143(3); 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH AHMEDABAD BEFORE S/SHRI RAJPAL YADAV, JM, & MANISH BORAD, AM. ITA NO.2749/AHD/2013 ASST. YEAR: 2008-09 M/S KARNAVATI EXPORT PVT. LTD., C-1, 243/2, PHASE-II, VINZOL, GIDC, VATVA, AHMEDABAD. VS INCOME-TAX OFFICER, WARD-4(2), AHMEDABAD APPELLANT RESPONDENT PAN AABCK 2996 D APPELLANT BY NONE RESPONDENT BY MR. LALA PHILIPS, SR.DR DATE OF HEARING: 19/11/2015 DATE OF PRONOUNCEMENT: 27/01/2016 O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF CIT(A)-VIII, AHMEDABAD, DATED 27.7.2013, IN APPEAL NO.CIT(A)- VIII/ITO/WD-4(2)/43/12-13 FOR ASST. YEAR 2008-09. A SSESSMENT WAS FRAMED U/S 143(3) OF THE I.T. ACT, 1961 (IN SHORT T HE ACT) ON 25/6/2010 BY ITO WARD-4(2), AHMEDABAD. 2. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEA L :- 1. THAT ON THE FACTS AND IN LAW OR IN THE CIRCUMSTA NCES OF THE CASE, THE LD. CIT HAS ERRED IN ASSESSING THE INCOME OF TH E APPELLANT ITA NO. 2749/AHD/2013 ASST. YEAR2008-09 2 OF RS.4,77,610/- INSTEAD OF NIL INCOME. AS SUCH AGG REGATE ADDITION OF RS.4,77,610/- MAY PLEASE BE DELETED. 2. THAT THE LD. CIT HAS WRONGLY SUSTAINED THE DISAL LOWANCE OF WRITING OFF OF ADVANCE LICENSE DEPB LICENSE, DFRC L ICENSE ON THE BASIS OF DISCONTINUATION OF BUSINESS. 3. THAT THE LD. CIT HAS NOT CONSIDERED THE EVIDENCE FOR CONTINUANCE OF BUSINESS THAT IS VAT RETURN SHOWING NIL INCOME AND THE LEGAL PRECEDENTS WHICH REITERATE THAT TEMPO RARY CESSATION OF THE ACTIVITY DUE TO ADVERSE CONDITIONS CANNOT BE CONSIDERED AS CESSATION OF THE BUSINESS. 4. THAT THE LD. CIT WRONGLY PRESUMED THAT THESE LIC ENSES HAVE NOT BEEN INCLUDED AS INCOME IN EARLIER YEARS. 5. THAT THE LD. CIT HAS NOT CONSIDERED THE EVIDENCE S PRODUCED BEFORE HIM IN REGARDS OF INCLUSION OF THESE LICENSE S IN PREVIOUS YEAR INCOME. 6. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT ERRED IN SUSTAINING THE SAME ASSESSMENT AS PASSED B Y THE LD. AO. AS SUCH THE ASSESSMENT MAY PLEASE BE HELD AS BA D IN LAW AND ADDITION MADE THEREON MAY KINDLY BE DELETED. 7. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEN D ALL THE ABOVE GROUNDS OF APPEAL OR DURING THE COURSE OF HEARING. 3. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY. IT HAS FILED ITS RETURN OF INCOME ON 30.9. 2008 DECLARING TOTAL INCOME OF RS.NIL AND BOOK PROFIT AT RS.1,37,581/- U /S 115JB OF THE ACT. THE CASE WAS SELECTED FOR SCRUTINY ASSESSMENT AND NOTICE U/S 143(2) OF THE ACT WAS ISSUED ON 25.8.2009 AND DULY SERVED UPON THE ASSESSEE ON 27.8.2009. DURING THE COURSE OF ASSESSM ENT PROCEEDINGS ON VERIFICATION OF PROFIT AND LOSS ACCO UNT IT WAS OBSERVED ITA NO. 2749/AHD/2013 ASST. YEAR2008-09 3 BY THE ASSESSING OFFICER THAT ASSESSEE HAS STOPPED ITS BUSINESS ACTIVITIES OF EXPORTING DYES AND CHEMICALS DURING F INANCIAL YEAR 2006- 07 AND NO BUSINESS ACTIVITIES WERE CARRIED OUT DURI NG THE YEAR UNDER APPEAL I.E. ASST. YEAR 2008-09 RELEVANT TO F.Y. 200 7-08. HOWEVER, THE ASSESSEE HAS CLAIMED CUSTOM DUTY EXPENSES IN R ELATION TO WRITE OFF OF UNUTILIZED IMPORT LICENSE AGAINST INCOME FRO M INTEREST. THE ASSESSING OFFICER WAS OF THE VIEW THAT INTEREST INC OME IS TAXABLE UNDER THE HEAD INCOME FROM OTHER SOURCES AND AS THE ASSESSEE HAS DISCONTINUED ITS BUSINESS IN THE PRECEDING FINANCIA L YEAR THEN THE ASSESSEE IS NOT ELIGIBLE TO CLAIM SET OFF OF CUSTOM DUTY EXPENSES OF RS.2,92,510/- AGAINST INCOME FROM OTHER SOURCES AND ACCORDINGLY DISALLOWED THE CLAIM OF SET OFF MADE BY THE ASSESSE E. 4. AGGRIEVED, ASSESSEE WENT IN APPEAL BEFORE CIT(A) WHO CONFIRMED THE ADDITION MADE BY ASSESSING OFFICER BY OBSERVING AS UNDER :- 3.3 DECISION I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSION OF THE APPELLANT. THE APPELLANT HAD CLAIMED DEDUCTION FROM INCOME ON ACCOUNT OF UTILIZE D DUTY PAYMENT BENEFIT WHICH WAS RECEIVED THROUGH ADVANCE LICENSE DEPB LICENSE AND DFRC LICENSE. IT WAS CLAIMED BY THE APPELLANT THAT SINCE THE BUSINESS WAS CLOSED IT COULD NOT USE THE BENEFIT AND THEREFO RE, THE SAME WAS CLAIMED AS DEDUCTION FROM THE INTEREST INCOME RECEI VED. THE AO HELD THAT THE EXPENSES DID NOT PERTAIN TO THE YEAR UNDER CONSIDERATION AND THE APPELLANT DID NOT EARNED ANY INCOME FROM BUSINE SS IN THE CURRENT YEAR AS IT HAD CLOSED AND DISCONTINUED THE BUSINESS . AFTER CONSIDERING ALL THE FACTS, I AM OF THE OPINI ON THAT THE APPELLANT CANNOT CLAIM DEDUCTION ON ACCOUNT OF THE UNTILISED BALANCE OF IMPORT DUTY ENTITLEMENT SUCH AS ADVANCE LICENSE, DE PB AND OTHER ITA NO. 2749/AHD/2013 ASST. YEAR2008-09 4 SIMILAR DUTY AFTER THE BUSINESS HAS BEEN CLOSED AND NO INCOME FROM THE BUSINESS FROM WHICH THESE INCENTIVES WERE EARNE D HAS BEEN SHOWN. THE APPELLANT HAS NOT DEMONSTRATED AS TO HOW THESE INCENTIVES WHICH ARE NOW PROPOSED TO BE WRITTEN OFF, WERE INCL UDED IN THE INCOME OF EARLIER YEARS. MOREOVER THE INTEREST INCOME HAS BEEN TAXED BY THE AO AS INCOME FROM OTHER SOURCES AND THERE IS NO REL ATION OF THE ENTITLEMENT WITH THE INCOME FROM OTHER SOURCES, IT CANNOT BE SAID THAT THIS EXPENDITURE HAS BEEN INCURRED FOR EARNING THE INTEREST INCOME. THE APPELLANT COMPANY HAS CLOSED THE BUSINESS AND T HE ENTITLEMENT PERTAINS TO EARLIER YEARS. IN VIEW OF ALL THESE FAC TS AND CIRCUMSTANCES THE DISALLOWANCE MADE BY THE AO IS UPHELD. 5. AGGRIEVED, ASSESSEE IS NOW IN APPEAL BEFORE THE TRIBUNAL. NONE APPEARED ON BEHALF OF THE ASSESSEE SO WE PROCE ED TO DISPOSE OF THE APPEAL ON THE BASIS OF SUBMISSIONS MADE BY L D. DR AND PERUSING THE MATERIAL AVAILABLE ON RECORD. THE LD. DR SUBMITTED THAT THE ASSESSEE HIMSELF HAS CATEGORICALLY SUBMITTED BE FORE THE LOWER AUTHORITIES THAT IT HAS STOPPED ITS BUSINESS ACTIVI TIES DURING FINANCIAL YEAR 2006-07 AND THE UNUTILIZED IMPORT LICENSE WHIC H HAS LAPSED DUE TO LAPSE OF DATE OF VALIDITY AND THE SAME HAS BEEN WRITTEN OFF IN THE PROFIT AND LOSS ACCOUNT AND THIS WRITE OFF OF EXPEN DITURE OF RS.2,92,510/- HAS BEEN CLAIMED FOR SET OFF AGAINST INCOME FROM OTHER SOURCES AND THE LOWER AUTHORITIES HAVE RIGHTLY DISA LLOWED THE CLAIM OF SET OFF AND, THEREFORE, THE APPEAL OF ASSESSEE SHOU LD BE DISMISSED. 6. AFTER CONSIDERING THE SUBMISSIONS OF LD. DR AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT THE ASSESSEE HAS C LAIMED CUSTOM DUTY EXPENDITURE OF RS.2,92,510/- IN ITS PROFIT AN D LOSS ACCOUNT AND HAS CLAIMED THIS EXPENDITURE AGAINST THE INTEREST I NCOME OF RS.521639/- SHOWN IN THE PROFIT AND LOSS ACCOUNT. T HE ISSUE ARISING IN THIS APPEAL IS TO EXAMINE AS TO WHETHER THE ASSESSE E WAS CARRYING ON ITA NO. 2749/AHD/2013 ASST. YEAR2008-09 5 ITS BUSINESS ACTIVITIES DURING THE YEAR BECAUSE IF AN ASSESSEE IS SAID TO BE CARRYING ON BUSINESS DURING THE YEAR AND INCU RS LOSSES DURING THE YEAR FROM THE BUSINESS THEN AS PER PROVISIONS O F SECTION 71 OF THE ACT SUCH BUSINESS LOSS CAN BE SET OFF AGAINST INCOM E FROM ANY OTHER HEAD EXCEPT INCOME FROM CAPITAL GAINS. FROM PERUSAL OF ASSESSMENT ORDER WE FIND THAT ASSESSEE HAS SUBMITTED FOLLOWING BEFORE THE ASSESSING AUTHORITY DURING THE ASSESSMENT PROCEEDIN GS :- FROM F.Y. 2006-07 ASSESSEE COMPANY STOP ITS BUSINE SS ACTIVITY OF EXPORTING DYES AND CHEMICALS DUE TO UPS AND DOWN IN THE MARKET AS WELL AS STIFF COMPETITION FROM THE MA RKET AND ANY NEW LICENCE NOT RECEIVED FROM THE F.Y. 2006-07 ONWA RDS SO LICENCE CANNOT BE UTILIZED AND THIS LICENCE EXPIRE OR LAPSE AND WHATEVER BENEFIT RECEIVABLE IS CANNOT BE RECEIVED, ASSESSEE COMPANY HAS NO ANY OTHER OPTION OTHER THAN WRITTEN OFF. 7. DURING APPELLATE PROCEEDINGS BEFORE LD. CIT(A) A SSESSEE HAS SUBMITTED AS UNDER :- FROM F.Y. 2006-07 ASSESSEE COMPANY STOP ITS BUSIN ESS ACTIVITY OF EXPORTING DYES AND CHEMICALS DUE TO UPS AND DOWN IN THE MARKET AS WELL AS STIFF COMPETITION FROM THE MA RKET AND ANY NEW LICENCE NOT RECEIVED FROM THE FY 2006-07 ONWARD S SO LICENCE CANNOT BE UTILIZED AND THE LICENCE EXPIRE O R LAPSE AND WHATEVER BENEFIT RECEIVABLE IS CANNOT BE RECEIVED A SSESSEE COMPANY HAS NO ANY OTHER OPTION OTHER THAN WRITTEN OFF. THE COMPANY IS IN TRADING BUSINESS AND WHENEVER TH ERE IS AN OPPORTUNITY THE COMPANY HAS AVAILED OF THE SAME AND HAS DONE THE BUSINESS. HOWEVER, FOR THE YEAR UNDER CONSIDERA TION THERE WAS NO TRANSACTION OF SALE AND PURCHASE. HOWEVER, T HE COMPANY HAD NOT CLOSED DOWN THE BUSINESS AND WAS CO NSTANTLY STRIVING IN THE COMPETITIVE SCENARIO TO SUSTAIN AND OBTAIN BUSINESS OPPORTUNITIES. ITA NO. 2749/AHD/2013 ASST. YEAR2008-09 6 8. FROM THE ABOVE SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE LOWER AUTHORITIES IT IS VERY CLEAR ON THE FACT THAT ASSESSEE HAS ACCEPTED THAT NO BUSINESS ACTIVITY HAS BEEN CARRIED OUT DURING THE YEAR UNDER APPEAL AND THE EXPENDITURE CLAIMED IN TH E PROFIT AND LOSS ACCOUNT WAS A WRITE OFF OF ASSET WHICH WAS STANDING IN THE BOOKS OF ACCOUNT. SUCH WRITE OFF COULD HAVE BEEN ALLOWED ONL Y IF THERE HAD BEEN A BUSINESS ACTIVITY RUNNING DURING THE YEAR. W E, THEREFORE, ARE OF THE VIEW THAT AS THE ASSESSEE HAS NOT CARRIED OU T ANY BUSINESS ACTIVITY DURING THE YEAR UNDER APPEAL, THEN THERE R EMAINS NO POSSIBILITY OF SET OFF OF BUSINESS LOSS AGAINST INT EREST INCOME TAXABLE UNDER THE HEAD INCOME FROM OTHER SOURCES. THEREFORE , WE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A) AN D UPHOLD THE SAME. THE APPEAL OF ASSESSEE IS DISMISSED. 9. IN THE RESULT, THE APPEAL OF ASSESSEE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH JANUARY, 2016 SD/- SD/- (RAJPAL YADAV) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER DATED 27/01/2016 MAHATA/- ITA NO. 2749/AHD/2013 ASST. YEAR2008-09 7 COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, AHMEDABAD 1. DATE OF DICTATION: 21/01/2016 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 27/01/2016 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 27/1/16 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: