The DCIT, (OSD)-1, Circle-4, Ahmedabad V. Megha Futures Pvt. Ltd., Ahmedabad

ITA 2848/AHD/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8279 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 25-09-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 21-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Business expenditure
• Section: 37

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD , , BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ I.T.A. NO.2848/AHD/2014 ( / ASSESSMENT YEAR : 2010-11) THE DY.CIT (OSD-1) CIRCLE-4, AHMEDABAD / VS. MEGHA FUTURES PVT.LTD. MEGHA HOUSE LAW GARDEN, MITHAKALI SIX ROAD, NAVRANGPURA AHMEDABAD # ./ ./ PAN/GIR NO. : AADCM 5460 C ( #& / APPELLANT ) .. ( '#& / RESPONDENT ) #&( / APPELLANT BY : SHRI MUDIT NAGPAL, SR.DR '#& )( / RESPONDENT BY : SHRI S.N. DIVETIA, AR *+ ), / DATE OF HEARING 26/09/2017 -./0 ), / DATE OF PRONOUNCEMENT 31/ 10 /2017 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL FILED AT THE INSTANCE OF THE REVENUE IS AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS )-VIII, AHMEDABAD [CIT(A) IN SHORT] DATED 25/08/2014 IN THE MATTER OF ASSESSMENT ORDER UNDER S.143(3) OF THE INCOME TAX A CT, 1961 ITA NO.2848/AHD/2014 DCIT VS. MEGHA FUTURES PVT.LTD. ASST.YEAR 2010-11 - 2 - (HEREINAFTER REFERRED TO AS 'THE ACT') DATED 05/03 /2013 FOR THE ASSESSMENT YEAR ASSESSMENT YEAR (AY) 2010-11. 2. THE GROUND OF APPEAL RAISED BY THE REVENUE REA DS AS UNDER:- THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELE TING THE DISALLOWANCE OF RS.43,00,696/- PERTAINING TO BUSINE SS EXPENDITURE FOR A.Y. 2010-11 WHERE THE ASSESSEE HAD NOT CARRIED OUT ANY BUSINESS ACTIVITY. 3. BRIEFLY STATED, THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING IN METAL, SCRAP AND RENTAL INCOME. THE RETURN OF INCO ME FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR ASSESSMENT YEAR (A Y) 2010-11 WAS SUBJECTED TO SCRUTINY ASSESSMENT. IN THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER (AO) NOTICED THA T THE ASSESSEE HAS CLAIMED CERTAIN DEDUCTIONS TOWARDS STAMP DUTY (RS.4 ,07,620/-), BROKERAGE EXPENSES (RS.1,44,000/-) AND BUSINESS EXP ENSES (RS.43,00,969/-) ATTRIBUTABLE TO SELF OCCUPIED HOUS E PROPERTY. HE ACCORDINGLY HELD THAT THE CLAIM OF DEDUCTION TOWARD S AFORESAID EXPENDITURE IN THE RETURN OF INCOME IS NOT PERMISSI BLE IN LAW. THE AO WHILE GIVING TO AFORESAID CONCLUSION INTER ALIA OBSERVED THAT THE ASSESSEE HAS NOT DONE ANY BUSINESS ACTIVITY DURING THE YEAR AND NO SALE OR PURCHASE OF GOODS HAVE BEEN RECORDED DURING THE YEA R BY IT. THE AO NOTED THAT THE ASSESSEE HAS EARNED RENTAL INCOME FR OM HOUSE PROPERTY ONLY. THE AO THUS NOTED THAT EXPENDITURE CLAIMED T OWARDS STAMP DUTY AND BROKERAGE ARE NOT ELIGIBLE FOR DEDUCTION UNDER S.24 OF THE ACT. ITA NO.2848/AHD/2014 DCIT VS. MEGHA FUTURES PVT.LTD. ASST.YEAR 2010-11 - 3 - SIMILARLY, ADMINISTRATIVE AND OTHER EXPENSES, FINAN CE CHARGES ETC. ARE NOT ALLOWABLE EXPENDITURE IN THE ABSENCE OF ANY BUSINES S ACTIVITIES. 4. AGGRIEVED BY THE AGGREGATE DISALLOWANCE OF BUSIN ESS EXPENSES OF RS.43,00,696/- INTER ALIA CLAIMED BY THE ASSESSEE, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). THE CIT(A) INTER ALIA NOTICED THAT ALTHOUGH THERE WERE NO PURCHASE OR SALES DURING THE YEAR, TH ERE WAS NO CLOSURE OR STOPPAGE OF THE BUSINESS CARRIED OUT BY THE ASSESSE E ON A PERMANENT BASIS. THE CIT(A) ACCORDINGLY ADMITTED THE CLAIM OF BUSINE SS EXPENDITURE OF THE ASSESSEE. THE RELEVANT OPERATIVE PARA OF THE O RDER OF THE CIT(A) READS AS UNDER: I HAVE CAREFULLY CONSIDERED THE SUBMISSION GIVEN B Y THE APPELLANT AND THE FACTS RELATED TO THIS ISSUE. I AM COMPLETE AGREEMENT WITH THE FINDINGS GIVEN BY THE AO THAT THE STAMP DU TY AND BROKERAGE EXPENSES WHILE EARNING THE HOUSE PROPERTY INCOME AR E NOT DEDUCTIBLE UNDER THE PROVISION OF SECTION 24(B) OF THE ACT AS THE SAME WERE NOT PROVIDED THEREIN. THE SUBMISSION OF THE APPELLANT THAT THESE WERE INCURRED FOR EARNING THE INCOME FROM HOUSE PROPERTY IS NOT MATERIAL AS THE COMPUTATION OF INCOME FROM HOUSE PROPERTY IS CL EARLY LAID OUT IN THE PROVISIONS OF SECTION 24 AND THESE EXPENSES ARE NOT DEDUCTIBLE. ACCORDINGLY, THE CLAIM OF THE APPELLANT IS DISMISSE D AND THE DISALLOWANCE ON THIS ACCOUNT MADE BY THE AO IS UPHE LD. THE RELATED GROUND OF APPEAL IS ACCORDINGLY DISMISSED. 4.3.2 THE OTHER GROUNDS OF APPEAL ARE. REGARDING. T HE DISALLOWANCE OF EXPENDITURE OF RS. 4300696/- WHICH WAS CLAIMED BY T HE APPELLANT AS BUSINESS EXPENDITURE. THE AO DISALLOWED THE CLAIM O N THE GROUND THAT THE APPELLANT DID NOT MAKE ANY SALE AND PURCHASES A ND IN ABSENCE OF ANY ACTIVITY THE EXPENSES WERE NOT ADMISSIBLE UNDER SECTION 37 OF THE ACT. THE APPELLANT ON THE OTHER HAND HAS SUBMITTED THAT THERE WAS NO ITA NO.2848/AHD/2014 DCIT VS. MEGHA FUTURES PVT.LTD. ASST.YEAR 2010-11 - 4 - CLOSURE OR STOPPAGE OF THE BUSINESS CARRIED OUT BY THE APPELLANT ON A PERMANENT BASIS BUT IT WAS A CASE OF LULL PERIOD WH ERE SALE PURCHASES WERE NOT MADE, IT HAS RELIED IN THE CASE OF HINDUS TAN CHEMICALS WORKS PVT. LTD. 120 ITR 561 MUMBAI. THE APPELLANT HAS SUB MITTED THAT THERE WERE SALES IN THE PRECEDING AND SUBSEQUENT ASSESSME NT YEARS WHICH PROVE THAT THE APPELLANT HAD NOT DISCONTINUED THE B USINESS IN THE YEAR UNDER CONSIDERATION. ON A CAREFUL CONSIDERATION OF THE ENTIRE FACTS OF T HE CASE, IT IS NOTED THAT THERE IS FORCE IN THE ARGUMENT OF THE AP PELLANT COMPANY THAT IT WAS NOT A CASE OF CLOSURE OF BUSINESS BUT IT WAS A FULL PERIOD WHERE NO BUSINESS WAS CARRIED OUT. THE APPELLANT HAS CONDUCT ED BUSINESS IN THE IMMEDIATELY PRECEDING AND SUBSEQUENT ASSESSMENT, YE ARS. THEREFORE, THE CLAIM OF THE APPELLANT THAT THE BUSINESS WAS NO T CLOSED IS ACCEPTABLE. ONCE THE BUSINESS IS NOT CLOSED AND IT WAS THE INTENTION OF THE APPELLANT TO CONTINUE THE BUSINESS IN SUBSEQUEN T YEARS THE EXPENSES IN KEEPING THE BUSINESS OF RUNNING ARE TO BE ALLOWE D. A PERUSAL OF THE INCOME COMPUTATION THE STATEMENT F ILED WITH THE RETURN OF INCOME SHOW THAT THE-APPELLANT HAS SEPARATELY SH OWN INCOME FROM HOUSE PROPERTY AND PROFITS AND GAINS OF BUSINESS AN D PROFESSION. WHILE WORKING OUT THE PROFITS AND GAINS OF BUSINESS OR PR OFESSION THE APPELLANT HAS DISALLOWED SEVERAL EXPENSES SUCH AS REPAIRS TO BUILDING MUNICIPAL TAX, STAMP DUTY EXPENSES WHICH ARE DIRECTLY RELATED TO INCOME FROM HOUSE PROPERTY. AFTER DISALLOWING AND MAKING ADJUST MENTS ON ACCOUNT OF DEPRECIATION A NET LOSS FROM BUSINESS HAS BEEN S HOWN AT RS.4157768/-. THE APPELLANT HAS ACCORDINGLY SHOWN A TOTAL INCOME OF RS.1,23,13,247/- AFTER REDUCING THE LOSS FROM BUSIN ESS FROM INCOME FROM HOUSE PROPERTY. SINCE THIS IS AN INTER-HEAD ADJUSTM ENT FOR THE CURRENT YEAR INCOME, THE SAME IS PERMISSIBLE AS PER THE PRO VISIONS OF INCOME TAX ACT. AS DISCUSSED IN THE PRECEDING PARA, THE A PPELLANT HAS NOT CLOSED DOWN ITS BUSINESS BUT THERE WAS A TEMPORARY LULL IN THE CURRENT ASSESSMENT YEAR. ACCORDINGLY, THE LOSSES OF BUSINE SS WILL HAVE TO BE ADJUSTED FROM THE INCOME FROM HOUSE PROPERTY FOR TH E CURRENT YEAR. THE ACTION OF THE AO WAS ACCORDINGLY NOT JUSTIFIED. TH E RELATED GROUND OF APPEAL IS ACCORDINGLY ALLOWED. ITA NO.2848/AHD/2014 DCIT VS. MEGHA FUTURES PVT.LTD. ASST.YEAR 2010-11 - 5 - 5. AGGRIEVED, THE REVENUE PREFERRED APPEAL BEFORE T HE TRIBUNAL. 6. THE LD.DR FOR THE REVENUE RELIED UPON THE ORDER OF THE AO AND SUBMITTED THAT IN THE ABSENCE OF ANY BUSINESS ACTIV ITY, THE CLAIM OF BUSINESS EXPENDITURE CANNOT BE SAID TO BE INCURRED FOR THE PURPOSE OF BUSINESS. IT WAS THUS SUBMITTED THAT THE BUSINESS EXPENDITURE CLAIMED BY THE ASSESSEE HAS BEEN RIGHTLY DISALLOWED BY THE AO AND WRONGLY ACCEPTED BY THE CIT(A). 7. THE LD.AR FOR THE ASSESSEE, ON THE OTHER HAND, P OINTED OUT THAT NOTWITHSTANDING THE ABSENCE OF ANY PURCHASE OR SALE DURING THE YEAR, THE BUSINESS WAS NOT SHUT-DOWN. THE LD.AR SUBMITTED TH AT THE CIT(A) HAS RIGHTLY APPRECIATED THE FACTS IN PERSPECTIVE AND HA S COME TO A RIGHTFUL CONCLUSION IN ACCORDANCE WITH LAW. 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. THE ELIGIBILITY OF CLAIM OF BUSINESS EXPENDITURE IN THE ABSENCE OF BUSINESS ACTIVITIES IS IN CONTROVERSY. IT IS AN ADMITTED PO SITION THAT NO BUSINESS ACTIVITY HAS BEEN CARRIED OUT DURING THE YEAR. HOW EVER, THE AO HAS NOT BROUGHT ANYTHING ON RECORD TO SHOW THAT BUSINESS HA S BEEN PERMANENTLY CLOSED. MERE INACTIVATION OF BUSINESS TEMPORARILY OWNING TO VARIOUS INTERNAL OR EXTERNAL FACTORS WILL NOT DISENTITLE TH E ASSESSEE FROM CLAIMING EXPENDITURE ACTUALLY INCURRED PER SE SO LONG AS EXPENDITURE HAVE BEEN INCURRED FOR THE PURPOSE OF BUSINESS WHOLLY AND EXC LUSIVELY. THEREFORE, WE DO NOT FIND ANY FAULT IN THE REASONS ADOPTED BY THE CIT(A) IN ITA NO.2848/AHD/2014 DCIT VS. MEGHA FUTURES PVT.LTD. ASST.YEAR 2010-11 - 6 - ADMITTING THE CLAIM OF THE ASSESSEE. CONSEQUENTLY, WE DECLINE TO INTERFERE. 9. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. THIS ORDER PRONOUNCED IN OPEN COURT ON 31/ 10 /2017 SD/- SD/- ( ) ( ) ( MAHAVIR PRASAD ) ( PRADIP KUMAR KEDIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 31/ 10 /2017 4..*,.*../ T.C. NAIR, SR. PS !'#$#! / COPY OF THE ORDER FORWARDED TO : 1. #& / THE APPELLANT 2. '#& / THE RESPONDENT. 3. 567, 8, / CONCERNED CIT 4. 8, ( ) / THE CIT(A)-VIII, AHMEDABAD 5. 9:;,*67 , 67 0 , 5 / DR, ITAT, AHMEDABAD 6. ;<+ / GUARD FILE. / BY ORDER, '9,, //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 31.10.17(DICTATION-PAD 10 - PAGES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 31.10.17 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.31.10.17 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 31.10.17 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER