M/S. TANSY INVESTMENTS PVT.LTD., MUMBAI V. ACIT-8(3), MUMBAI

ITA 3722/MUM/2009

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 6275 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-11-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Next Hearing Date: 20-09-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 09-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SU RENDRA KUMAR
• Keywords: Business income; Depreciation

Judgement Text

ITA NO.: 3722/M UM/09 ASSESSMENT YEAR: 2004-05 PAGE 1 OF 9 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI J BENCH, MUMBAI [CORAM : D K AGARWAL JM, AND PRAMOD KUMAR AM] ITA NO.: 3722/MUM/09 ASSESSMENT YEAR: 2004-05 TANSY INVESTMENTS PVT. LTD. .. APPELL ANT 1, ANUP, SUN BEAM CHS NEW VERSOVA LINK ROAD ANDHERI (WEST), MUMBAI 400 053 PAN : AAACT4959N VS. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 8(3), MUMBAI 400 020 .. RESPONDE NT APPEARANCES: STANY SALDHANA, FOR THE ASSESSEE SURENDRA KUMAR, FOR THE ASSESSING OFFICER O R D E R PER PRAMOD KUMAR: 1. THE SHORT ISSUE THAT WE ARE REQUIRED TO ADJUDICA TE IN THIS APPEAL IS WHETHER OR NOT THE CIT(A) WAS JUSTIFIED IN UPHOLDIN G THE DISALLOWANCE OF EXPENDITURE OF RS 12,55,869, ON THE GROUND THAT THE RE ARE NO BUSINESS ACTIVITIES DURING THE YEAR UNDER CONSIDERATION AND THAT THE ASSESSEES INCOME OF DIVIDEND, INTEREST AND OTHER INCOME BEING TAXABLE UNDER THE HEAD INCOME FROM OTHER SOURCES. THE ASSESSMENT YEAR IN VOLVED IN 2004-05 AND THE IMPUGNED ASSESSMENT WAS FRAMED UNDER SECTION 14 3(3) OF THE INCOME TAX ACT, 1961. ITA NO.: 3722/M UM/09 ASSESSMENT YEAR: 2004-05 PAGE 2 OF 9 2. THE ISSUE IN APPEAL LIES IN A VERY NARROW COMPAS S OF MATERIAL FACTS. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, TH E ASSESSING OFFICER NOTICED THAT THE WHILE THE ASSESSEE HAS SHOWN INCOM E OF RS 29,44,729 AGAINST DIVIDEND, INTEREST AND OTHER INCOMES WHICH ARE TAXABLE UNDER THE HEAD INCOME FROM OTHER SOURCES, THE ASSESSEE HAS CLAIMED AN EXPENDITURE OF RS 12,55,869 WHICH IS IN THE NATURE OF EXPENDITU RE WHICH CAN ONLY BE ALLOWED DEDUCTION FOR BUSINESS INCOME. IT WAS IN TH IS BACKDROP THAT THE ASSESSING OFFICER DISALLOWED THE EXPENSES OF RS 12, 55,869. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CI T(A). IT WAS SUBMITTED BY THE ASSESSEE THAT THE ASSESSEE WAS AN INVESTMENT COMPANY AND WAS ASSESSED AS SUCH IN PAST. SINCE THE ASSESSEE WAS IN THE BUSINESS OF INVESTMENT, THE EXPENDITURE RELATING TO ITS BUSINES S WAS TO BE ALLOWED AS DEDUCTION IN COMPUTATION OF BUSINESS INCOME. THE M AIN BUSINESS OF THE ASSESSEE WAS CLAIMED TO BE INVESTMENT. IT WAS ALSO CONTENDED THAT TO CARRY ON BUSINESS IT HAD TO HAVE ITS OWN INFRASTRUCTURE, AND, FOR THIS PURPOSES, THE ASSESSEE HAD INCURRED EXPENDITURE. IT WAS ALSO SUBMITTED THAT MOST OF THE EXPENSES CONSIDERED ABOVE ( I.E. SALARY, REPAIRS AND MAINTENANCE, ELECTRICITY AND PHONE CHARGES, AUDITORS REMUNERATIO N, DEPRECIATION, PRINTING AND STATIONERY ETC) WERE STATUTORY IN NATURE AND HAD TO BE INCURRED EV EN IF NO INCOME COULD HAVE ARISEN DURING THE YEAR AND TH AT, OTHER THAN SUCH EXPENSES, THE EXPENSES WERE FOR DAY TO DAY MAINTEN ANCE OF OFFICE. IT WAS THUS CONTENDED THAT MERELY BECAUSE INCOME EARNED BY THE ASSESSEE WAS TAXABLE UNDER THE HEAD INCOME FROM OTHER SOURCES, THE DEDUCTION OF EXPENSES COULD NOT BE DECLINED. THE CIT(A) WAS NOT REALLY IMPRESSED BY THESE ARGUMENTS. HE OBSERVED THAT THE APPELLANT HA D NOT BROUGHT ON RECORD ANY MATERIAL TO SUGGEST THAT THE APPELLANT I S CONDUCTING INVESTMENT ACTIVITIES THROUGHOUT THE YEAR WITH A VIEW TO EARN PROFIT AND TOOK NOTE OF THE ASSESSING OFFICERS FINDING THAT INVESTMENTS HA VE NOT CHANGED DURING THE YEAR. HE ALSO NOTED THAT THOUGH, AS STATED IN T HE REMAND REPORT, THE ASSESSEE COMPANY WAS TREATED AS INVESTMENT COMPANY IN PAST, IT CANNOT BE TREATED AS INVESTMENT COMPANY IN VIEW OF HIS ABOVE OBSERVATIONS. IT WAS ITA NO.: 3722/M UM/09 ASSESSMENT YEAR: 2004-05 PAGE 3 OF 9 ALSO NOTED THAT THE EXPENDITURE IN QUESTION COULD N OT BE ALLOWED AS DEDUCTION UNDER THE HEAD INCOME FROM OTHER SOURCES . THE CIT(A) THUS UPHELD, AND IN FACT FURTHER FORTIFIED, THE IMPUGNED DISALLOWANCE. THE ASSESSEE IS NOT SATISFIED WITH THE ORDER OF THE CIT (A) AND IS IN APPEAL BEFORE US. 3. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED THE FACTUAL MATRIX OF THE CASE AS ALSO THE APPLICABLE LEGAL POSITION. 4. WE FIND THAT THE ISSUE IN THIS APPEAL IS SQUAREL Y COVERED BY A COORDINATE BENCHS DECISION IN THE CASE OF ITO VS MOKUL FINANCE PVT LTD (110 TTJ 445), WHEREIN THE TRIBUNAL HAS, INTER ALIA , OBSERVED AS FOLLOWS : 2. IN THE FIRST GROUND OF APPEAL, THE ASSESSING OFF ICER IS AGGRIEVED THAT THE CIT(A) WAS NOT JUSTIFIED IN DELETING THE A DDITION OF RS. 6,36,210 ON ACCOUNT OF EXPENSES CLAIMED DURING THE YEAR, WHEN NO BUSINESS WAS CONDUCTED BY THE ASSESSEE DURING TH E RELEVANT PREVIOUS YEAR. 3. THE MATERIAL FACTS OF THE CASE ARE LIKE THIS. TH E ASSESSEE IS A DOMESTIC COMPANY AND, IN THE RELEVANT PREVIOUS YEAR , IT HAD INCOME ONLY FROM INTEREST AND DIVIDEND. IN THE COUR SE OF SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTIC ED THAT NO BUSINESS ACTIVITIES WERE CARRIED OUT BY THE ASSESSE E. HE THUS REQUIRED THE ASSESSEE TO SHOW CAUSE AS TO WHY NOT THE EXPENSES OF THE ASSESSEE BE DISALLOWED AS THERE WAS NO BUSIN ESS ACTIVITY DURING THE YEAR AND THE INCOME EARNED BE BROUGHT TO TAX. THE ASSESSEE SUBMITTED THAT THE EXPENSES INCURRED BY TH E ASSESSEE ARE ONLY ON ACCOUNT OF SALARIES AND CONVEYANCE TO S TAFF WHICH WAS REQUIRED TO RUN THE OFFICE, AND ON ACCOUNT OF P AYMENT OF PROPERTY TAX OF THE BUILDING FROM WHICH OFFICE IS R UN. IT WAS POINTED OUT THAT THERE WAS NO SALE AND PURCHASE OF SHARES IN THE RELEVANT PREVIOUS YEAR AS THE STOCK MARKET WAS UNST ABLE AND ITA NO.: 3722/M UM/09 ASSESSMENT YEAR: 2004-05 PAGE 4 OF 9 MARKET CONDITIONS WERE NOT STABLE. THERE IS NO DISP UTE ABOUT THE FACT THAT IN THE EARLIER YEARS, THE ASSESSEE WAS EN GAGED IN BUSINESS OF BUYING AND SELLING SHARES AND ITS INCOM E FROM THIS ACTIVITY WAS BROUGHT TO TAX UNDER THE HEAD BUSINES S INCOME. THE ASSESSING OFFICER REJECTED THE EXPLANATION OF T HE ASSESSEE BY OBSERVING THAT AS ADMITTEDLY THERE WAS NO BUSINESS ACTIVITY DURING THE RELEVANT PREVIOUS YEAR, NO EXPENSES COUL D BE ALLOWED. THE LOSS CLAIMED BY THE ASSESSEE WAS DISALLOWED, AN D THE BUSINESS INCOME WAS ASSESSED AT NIL. AGGRIEVED, A SSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). THE CIT(A) HELD THAT THE ASSESSING OFFICER HAS NOT DOUBTED GENUINEN ESS OF THE EXPENDITURE, THAT THE EXPENDITURE WAS NECESSARY FOR RUNNING THE ORGANISATION, THAT IT WAS NEITHER EXTRAVAGANT NOR E XCESSIVE, AND THAT, THEREFORE, THE ASSESSING OFFICER WAS NOT JUST IFIED IN DISALLOWING THE SAME. THE ASSESSING OFFICER IS AGGR IEVED OF THE RELIEF SO GIVEN BY THE CIT(A) AND IS IN APPEAL BEFO RE US. 4. SMT. IYER, LEARNED DEPARTMENTAL REPRESENTATIVE, SUBMITS THAT THE CIT(A) WAS INFLUENCED BY THE FACTORS WHICH WERE NOT RELEVANT TO DECIDE WHETHER OR NOT THE EXPENSES IN QUESTION S HOULD BE ALLOWED AS DEDUCTION IN COMPUTATION OF BUSINESS INC OME. SHE SUBMITS THAT GENUINENESS OF EXPENDITURE, ON WHICH E MPHASIS IS PLACED BY THE CIT(A), IS WHOLLY IRRELEVANT IN COMIN G TO THE CONCLUSION THAT THE EXPENDITURE IS TO BE ALLOWED EV EN AS THERE IS NO BUSINESS ACTIVITY DURING THE RELEVANT PREVIOUS Y EAR. IT IS ALSO POINTED OUT THAT REASONABLENESS OF EXPENDITURE ALSO HAS NO BEARING ON THIS ISSUE. IT IS FURTHER POINTED OUT TH AT THE REASONING OF THE CIT(A) IS VAGUE AND LACKS SPECIFIC AND COGEN T REASONS, GERMANE TO THE CONTEXT, FOR DELETING THE DISALLOWAN CE OF EXPENSES. LEARNED DEPARTMENTAL REPRESENTATIVE RELIE S UPON TRIBUNALS ORDER IN THE CASE OF ADASOFT (INDIA) (P. ) LTD. V. DY. CIT [2006] 9 SOT 31 (DELHI) IN SUPPORT OF THE DISALLOWANCE OF EXPENDITURE WHEN BUSINESS IS NOT IN EXISTENCE. SHE RELIES UPON ITA NO.: 3722/M UM/09 ASSESSMENT YEAR: 2004-05 PAGE 5 OF 9 THE ORDER OF THE ASSESSING OFFICER, JUSTIFIES THE S AME, AND URGES US TO RESTORE THE ORDER OF THE ASSESSING OFFICER. D R. GUPTA, LEARNED COUNSEL FOR THE ASSESSEE, SUPPORTS AND JUST IFIES THE ORDER OF THE CIT(A). DR. GUPTA SUBMITS THAT THE ASSESSEE IS A COMPANY AND THE EXPENDITURE INCURRED BY THE ASSESSEE ARE MI NIMAL EXPENDITURE JUST TO KEEP THE COMPANY AFLOAT. IT IS SUBMITTED THAT THE ASSESSEE WAS NOT CARRYING OUT BUSINESS ACTIVITY DUE TO ADVERSE MARKET CONDITIONS, BUT THE ASSESSEE BEING A N ARTIFICIAL JURIDICAL PERSON, HAS TO INCUR EXPENDITURE FOR MAIN TAINING ITS EXISTENCE AND FOR CARRYING OUT WHATEVER LITTLE ACTI VITIES THAT THE ASSESSEE IS INVOLVED IN. OUR ATTENTION IS INVITED T O HONBLE CALCUTTA HIGH COURTS JUDGMENT IN THE CASE OF CIT V . GANGA PROPERTIES LTD. [1993] 199 ITR 94 1 WHEREIN IT IS HELD THAT EVEN WHEN COMPANY HAS ONLY EARNINGS INCOME FROM OTHER SO URCES, THE EXPENDITURE INCURRED BY THE COMPANY FOR ITS CONTINU ED EXISTENCE AND FOR RETAINING CLERICAL STAFF, SECRETARY AND ACC OUNTANT AND OTHER INCIDENTAL EXPENSES, ARE ALLOWABLE DEDUCTION. DR. GUPTA THEN TAKES US THROUGH THE JUDGMENT OF HONBLE PUNJA B & HARYANA HIGH COURT IN THE CASE OF NAKODAR BUS SERVICE (P.) LTD. V. CIT [1989] 179 ITR 506 2 WHEREIN IT WAS HELD THAT EVEN WHEN THE ASSESSEES BUSINESS WAS DISCONTINUED, DEDUCTION IN RESPECT OF SALARIES PAID TO EMPLOYEES WAS ALLOWABLE DEDUCTION AGAINST INTEREST INCOME. THE NEXT JUDICIAL PRECEDENT HE REL IES UPON IS A JUDGMENT OF HONBLE ALLAHABAD HIGH COURT IN THE CAS E OF CIT V. RAMPUR TIMBERY & TURNERY CO. LTD. [1981] 129 ITR 58 3 . IN THIS CASE, IT WAS HELD THAT THE EXPENDITURE INCURRED BY A COMPANY, FOR RETAINING ITS STATUS AS COMPANY AND FOR ITS CONTINU ED EXISTENCE AS SUCH, IS ALLOWABLE DEDUCTION, EVEN AFTER DISCONT INUATION OF BUSINESS IN CERTAIN CIRCUMSTANCES. ON THE STRENGTH OF THESE PRECEDENTS, HE JUSTIFIES THE CONCLUSIONS ARRIVED AT BY THE CIT(A). HIS NEXT TIER OF DEFENSE CONSISTS OF THE PROPOSITIO N THAT ONLY BECAUSE NO BUSINESS ACTIVITY IS CARRIED ON IN THE R ELEVANT PREVIOUS YEAR, AND IN THE ABSENCE OF ANY CATEGORICA L FINDING TO ITA NO.: 3722/M UM/09 ASSESSMENT YEAR: 2004-05 PAGE 6 OF 9 THE EFFECT THAT BUSINESS HAS CLOSED FOR GOOD, THE A SSESSING OFFICER CANNOT JUMP TO THE CONCLUSION THAT THE BUSINESS HAS CEASED. THE DISTINCTION BETWEEN CLOSURE OF BUSINESS AND SUSPENS ION OF BUSINESS ACTIVITY IS SOUGHT TO BE HIGHLIGHTED AND T HE RELEVANT JUDICIAL PRECEDENTS CITED. IN REJOINDER, SMT. IYER ACCEPTS THAT THERE IS NO CATEGORICAL FINDING ABOUT CLOSURE OF BU SINESS, BUT SHE ADDS THAT THE LACK OF SUCH A FINDING CANNOT MEAN TH AT EXPENSES ARE TO BE ALLOWED EVEN AS THERE IS NO BUSINESS IN E XISTENCE. SHE REITERATES HER SUBMISSIONS AND URGES US TO RESTORE THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 5. HAVING GIVEN OUR CAREFUL CONSIDERATION TO THE RI VAL CONTENTIONS AND THE MATERIAL ON RECORD, WE ARE INCLINED TO UPHO LD THE CONCLUSIONS ARRIVED AT BY THE CIT(A). AS DR. GUPTA RIGHTLY CONTENDS, THE ASSESSEE BEING AN ARTIFICIAL JURIDICA L PERSON, IT NEEDS TO INCUR CERTAIN EXPENDITURE TO KEEP ITSELF A FLOAT AND HAVE ITS CONTINUED EXISTENCE. UNLIKE1 A NATURAL PERSON, A COMPANY CAN ONLY OPERATE THROUGH OTHER NATURAL PERSONSWHETHER EMPLOYEES OR OTHERS. IT IS NOT THE CASE OF THE ASSESSING OFFI CER THAT THE EXPENDITURE OF THE ASSESSEE COMPANY ARE EXCESSIVE O R UNREASONABLE VIS-A-VIS ITS LEGITIMATE BUSINESS REQU IREMENTS. THE HONBLE HIGH COURTS HAVE CONSISTENTLY HELD THAT IN THE CASE OF THE CORPORATE ASSESSEES SUCH EXPENSES HAVE TO BE ALLOWE D AS DEDUCTION IRRESPECTIVE OF WHETHER OR NOT THE ASSESS EE IS ENGAGED IN ACTIVE BUSINESS AND EVEN IF ASSESSEE HAS ONLY PA SSIVE INCOMES. THE CIT(A) WAS, THEREFORE, JUSTIFIED IN HIS CONCLUS IONS. THAT IS, HOWEVER, NOT THE ONLY REASON WHY THE DISALLOWANCE M ADE BY THE ASSESSING OFFICER WAS UNSUSTAINABLE IN LAW. WE AGRE E WITH DR. GUPTAS SECOND LINE OF ARGUMENT AS WELL. WE FIND TH AT THE WHOLE CAUSE OF ACTION OF DISALLOWANCE OF EXPENSES IS IN T HE BACKGROUND OF ASSESSING OFFICERS OBSERVATION THAT THE ASSESSE E DID NOT CARRY OUT ANY BUSINESS TRANSACTIONS WHICH AT BEST WAS ASS ESSING OFFICERS FINDING ABOUT AN ACTIVITY OF BUSINESS NOT BEING ITA NO.: 3722/M UM/09 ASSESSMENT YEAR: 2004-05 PAGE 7 OF 9 FUNCTIONAL IN THE RELEVANT PREVIOUS YEAR. IN OUR OP INION, NOT CARRYING ON BUSINESS ACTIVITY IN A PARTICULAR PERIO D CANNOT BE EQUATE WITH CLOSURE OF BUSINESS AS IT TAKES AN UNSU STAINABLY NARROW VIEW OF THE SCOPE OF CESSATION OF A BUSINESS . IN THE CASE OF LVE. VAIRAVAN CHETTIAR V. CIT [1969] 72 WR 114, THE IR LORDSHIPS OF HONBLE MADRAS HIGH COURT WERE IN SEISIN OF A SI TUATION WHERE THE ASSESSEE HAD OBTAINED AN IMPORT LICENCE FOR DOI NG ARECA NUT BUSINESS BUT DUE TO ADVERSE CONDITIONS IN MARKET, H E TEMPORARILY SUSPENDED THE ARECA NUT BUSINESS FOR THE ASSESSMENT YEAR IN QUESTION. NEVERTHELESS, HE WAS MAINTAINING THE ESTA BLISHMENT AND WAS WAITING FOR IMPROVED MARKET CONDITIONS IN A RECA NUT. IT WAS THUS AN ADMITTED POSITION THAT NO ACTIVITIES WE RE CARRIED OUT SO FAR AS THIS PART OF THE BUSINESS WAS CONCERNED. ON THESE FACTS, THEIR LORDSHIPS TOOK NOTE OF THE POSITION THAT THE RE IS NOTHING ON RECORD TO SHOW THAT HE COMPLETELY ABANDONED OR C LOSED THE BUSINESS FOREVER. ON THE OTHER HAND, HIS BOOKS OF A CCOUNT REVEALED THAT HE WAS MEETING THE ESTABLISHMENT CHAR GES AND INTEREST PAYMENTS AS DETAILED IN THE ACCOUNTS IN TH E YEAR OF ACCOUNTS. IT WAS THEN OBSERVED THAT THE QUESTION W HETHER THE BUSINESS IS BEING CARRIED ON MUST DEPEND IN EACH CA SE ON ITS OWN FACTS AND NOT ON ANY GENERAL THEORY OF LAW. THEIR L ORDSHIPS THEN REFERRED TO, WITH APPROVAL, LORD SUMMERS OBSERVATI ON IN IRC V. SOUTH BEHAR RAILWAY CO. LTD. [1925] 12 TAX CASES 65 7 THAT BUSINESS IS NOT CONFINED TO BEING BUSY; IN MANY BUS INESSES LONG INTERVALS OF INACTIVITY OCCUR. ...THE CONCERN IS S TILL A GOING CONCERN THOUGH A VERY QUIET ONE. AFTER ELABORATE S URVEY OF JUDICIAL PRECEDENTS ON THE ISSUE, THEIR LORDSHIPS C ONCLUDED, IN THE LIGHT OF, AS NOTED ABOVE, THE FACTUAL POSITION THAT THERE IS NOTHING ON RECORD TO SHOW THAT HE COMPLETELY ABANDO NED OR CLOSED THE BUSINESS FOREVER. ON THE OTHER HAND, HIS BOOKS OF ACCOUNT REVEALED THAT HE WAS MEETING THE ESTABLISHM ENT CHARGES AND INTEREST PAYMENTS AS DETAILED IN THE ACCOUNTS I N THE YEAR OF ACCOUNT, THAT THE LOSS IN ARECANUT BUSINESS, IN WH ICH ADMITTEDLY ITA NO.: 3722/M UM/09 ASSESSMENT YEAR: 2004-05 PAGE 8 OF 9 NO ACTIVITY WAS CARRIED OUT DURING THE RELEVANT PRE VIOUS YEAR, WAS TO BE SET OFF AGAINST ASSESSEES BUSINESS INCOM E IN THE YEAR. AS THE RATIO OF THE AFORESAID JUDGMENT IS SUMMED UP IN THE ITR HEADNOTES AT P. 115 OF THE REPORT, AS THE ASSESSEE WAS MAINTAINING THE ESTABLISHMENT AND WAITING FOR THE I MPROVED MARKET CONDITIONS IN ARECANUTS AND THERE WAS NOTHIN G TO SHOW THAT HE COMPLETELY ABANDONED OR CLOSED THE BUSINESS FOREVER, THE BUSINESS MUST BE DEEMED TO BE CONTINUING. IN THE L IGHT OF THIS LEGAL POSITION, IT WOULD FOLLOW THAT UNLESS THERE I S SOME MATERIAL ON RECORD TO SHOW THAT THE ASSESSEE HAS COMPLETELY ABANDONED THE SHARE DEALING BUSINESS, MERELY BECAUSE THERE AR E NO BUSINESS TRANSACTIONS IN THE RELEVANT PREVIOUS YEAR CANNOT B E REASON ENOUGH TO COME TO THE CONCLUSION THE BUSINESS HAS C OME TO AN END. IT COULD NOT THUS BE SAID; AS WAS THE CASE BEF ORE THE HONBLE MADRAS HIGH COURT, THAT THE ASSESSEE HAD COMPLETEL Y ABANDONED OR CLOSED THE BUSINESS FOREVER. UNLESS THE BUSINES S IS ABANDONED OR CLOSED AND EVEN IF BUSINESS IS AT A DORMANT STAG E WAITING FOR PROPER MARKET CONDITIONS TO DEVELOP, THE EXPENDITUR E INCURRED IN THE COURSE OF SUCH A BUSINESS IS TO BE ALLOWED AS D EDUCTION. FOR THIS REASON ALSO, THE DISALLOWANCE MADE BY THE ASSE SSING OFFICER WAS NOT JUSTIFIED, AND THE CIT(A) RIGHTLY DELETED T HE SAME. 5. WE SEE NO REASONS TO TAKE ANY OTHER VIEW OF THE MATTER THAN THE VIEW SO TAKEN BY THE COORDINATE BENCH, AND WE ARE I N CONSIDERED AGREEMENT WITH THE SAME. THE ASSESSEE BEING AN ARTI FICIAL JURIDICAL PERSON, IT NEEDS TO INCUR CERTAIN EXPENDITURE TO KEEP ITSEL F AFLOAT AND HAVE ITS CONTINUED EXISTENCE. UNLIKE A NATURAL PERSON, A COM PANY CAN ONLY OPERATE THROUGH OTHER NATURAL PERSONSWHETHER EMPLOYEES OR OTHERS. IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT THE EXPENDITURE OF THE ASSESSEE COMPANY ARE EXCESSIVE OR UNREASONABLE VIS-A-VIS ITS LEGITIM ATE BUSINESS REQUIREMENTS. THE HONBLE HIGH COURTSS, AS REFERRED TO IN THE COORDINATE BENCH ORDER, HAVE CONSISTENTLY HELD THAT IN THE CAS E OF THE CORPORATE ASSESSEES SUCH EXPENSES HAVE TO BE ALLOWED AS DEDUC TION IRRESPECTIVE OF ITA NO.: 3722/M UM/09 ASSESSMENT YEAR: 2004-05 PAGE 9 OF 9 WHETHER OR NOT THE ASSESSEE IS ENGAGED IN ACTIVE BU SINESS AND EVEN IF ASSESSEE HAS ONLY PASSIVE INCOMES. THE MERE FACT TH AT NO BUSINESS OPERATIONS HAVE BEEN CARRIED OUT IN THE RELEVANT PR EVIOUS YEAR ALSO DOES NOT LEAD TO THE CONCLUSION THAT THE ASSESSEE CEASED TO BE IN BUSINESS. UNLESS THE BUSINESS IS ABANDONED OR CLOSED AND EVEN IF BUSINESS IS AT A DORMANT STAGE WAITING FOR PROPER MARKET CONDITIONS TO DEVELOP, THE EXPENDITURE INCURRED IN THE COURSE OF SUCH A BUSINE SS IS TO BE ALLOWED AS DEDUCTION. 6. IN VIEW OF THESE DISCUSSIONS, AS ALSO BEARING I N MIND THE ENTIRETY OF THE CASE, THE IMPUGNED DISALLOWANCE INDEED DESERVES TO BE DELETED. FOR THE REASONS SET OUT ABOVE, WE DELETE THE IMPUGNED D ISALLOWANCE OF RS 12,55,869. THE ASSESSEE GETS THE RELIEF ACCORDINGLY . 7. IN THE RESULT, THE APPEAL IS ALLOWED IN THE TERM S INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT TODAY ON 24 TH DAY OF NOVEMBER, 2010. SD/- SD/- (D K AGARWAL) (PRAMOD KUM AR) JUDICIAL MEMBER ACCOUNTAN T MEMBER MUMBAI; 24 TH _ DAY OF NOVEMBER., 2010 . COPY FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER - , MUMBAI 4. COMMISSIONER (APPEALS) - , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, J BENCH, MUMBAI 6. GUARD FILE TRUE COPY BY O RDER ETC. ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, MUMBAI