ITO, New Delhi V. M/s Tosha International Ltd, New Delhi

ITA 4963/DEL/2012

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9995 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-04-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 26-02-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 19-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R C RAI
• Assessee Lawyers: J P CHANDRAKAR
• Keywords: Business income; Depreciation; Business expenditure; Assessment record

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH H NEW DELHI) BEFORE SHRI R.S. SYAL AND SHRI I.C. SUDHIR ITA NOS. 4963/DEL/2012 & 2054/DEL/2013 ASSESSMENT YEARS: 2008-09 & 2009-10 INCOME-TAX OFFICER, VS. TOSHA INTERNATIONAL LTD., WARD 16(3), E-34, 2 ND FLOOR, CON. PLACE, NEW DELHI. NEW DELHI. (PAN: AAACT4538K) (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI R.C. RAI , CA RESPONDENT BY: SHRI J.P. CHANDR AKAR, SR. DR DATE OF HEARING : 26.02.2015 DATE OF PRONOUNCEMENT: 23:04.2015 ORDER PER I.C. SUDHIR: JUDICIAL MEMBER THE REVENUE HAS PREFERRED ABOVE APPEALS ON THE FOLL OWING COMMON GROUND THAT: THE LEARNED CIT(APPEALS) ERRED IN LAW AND ON THE F ACTS OF THE CASE IN ALLOWING THE CLAIM OF THE ASSESSEE IN RESPE CT OF EXPENSES OF RS.17,88,199 IN THE ASSESSMENT YEAR 2008-09 AND RS. 12,92,951 IN ASSESSMENT YEAR 2009-10 DEBITED TO THE PROFIT AND L OSS ACCOUNT BECAUSE: I) THE ASSESSEE HAS NOT CARRIED OUT ANY BUSINESS ACTIV ITIES DURING THE YEAR UNDER CONSIDERATION. II) THE ASSESSEE HAS NOT CARRIED OUT ANY BUSINESS ACTIV ITY SINCE 1996-97; 2 III) EVEN IN THE LATER YEAR NO BUSINESS ACTIVITY HAS BEE N CARRIED OUT BY THE ASSESSEE. IV) I), II) & III) ABOVE PROVE THAT THE ASSESSEE HAS NO INTENTION TO RESUME ITS BUSINESS ACTIVITY AND THE ASSESSEE HA S STOPPED THE BUSINESS FOR GOOD FROM 1996-97. 2. HEARD AND CONSIDERED THE ARGUMENTS ADVANCED BY T HE PARTIES IN VIEW OF ORDERS OF THE AUTHORITIES BELOW, MATERIAL AVAILA BLE ON RECORD AND THE DECISIONS RELIED UPON. 3. THE FACTS IN BRIEF ARE THAT IN THE ASSESSMENT YE AR 2008-09, THE ASSESSEE HAS COMPUTED BUSINESS LOSS AMOUNTING TO RS.34,05,95 6 AFTER CLAIMING BUSINESS EXPENDITURE UNDER DIFFERENT DATES. FURTHER AFTER ADDING DEPRECIATION DEBITED IN PROFIT AND LOSS ACCOUNT TO RS.16,17,757, THE ASSESSEE COMPANY HAD DECLARED NET BUSINESS LOSS AT RS.17,88,199 AS PER C OMPUTATION OF INCOME FILED. AS PER PROFIT AND LOSS ACCOUNT, NO SALE OR P URCHASE HAD BEEN MADE DURING THE YEAR BY THE ASSESSEE. VIDE LETTER DATED 27.9.2010, THE ASSESSEE SUBMITTED THAT IT HAD NOT MANUFACTURED ANY PRODUCT AND NOT TRADED IN ANY ITEM AND THAT IT HAD ONLY EARNED INCOME FROM INTERE ST ON FDR DURING THE YEAR. THE ASSESSING OFFICER WAS OF THE VIEW THAT SI NCE NO BUSINESS ACTIVITY WAS CARRIED OUT DURING THE YEAR, THE QUESTION OF CO MPUTATION OF BUSINESS INCOME DID NOT ARISE. HE, THEREFORE, IGNORED THE LO SS DECLARED AT 3 RS.17,88,199 AND ASSESSED THE NET BUSINESS INCOME O F THE ASSESSEE AT NIL. THE LEARNED CIT(APPEALS) HAS, HOWEVER, ALLOWED THE CLAIMED EXPENSES INCURRED BY THE ASSESSEE TO THE TUNE OF RS.17,88,19 9. AGAINST THIS ACTION OF THE LEARNED CIT(APPEALS), THE REVENUE IS IN APPEAL. LIKEWISE IN THE ASSESSMENT YEAR 2009-10, THE ASSESSEE HAD CLAIMED B USINESS EXPENSES AMOUNTING TO RS.12,99,874 WHICH WAS DISALLOWED BY T HE ASSESSING OFFICER ON THE BASIS THAT NO BUSINESS ACTIVITIES WAS CARRIE D OUT AND INCOME FROM INTEREST ON BANK FDR AMOUNTING TO RS.6,923 WAS ASSE SSED AS INCOME FROM OTHER SOURCES. THE LEARNED CIT(APPEALS) HAS ALLOWED THE CLAIMED EXPENSES AGAINST WHICH THE REVENUE IS IN APPEAL. 4. IN SUPPORT OF THE GROUND, THE LEARNED SR. DR REI TERATED THE CONTENTS OF THE ASSESSMENT ORDER WHEREIN THE ASSESSING OFFICER HAS NOTED THAT DURING THE YEARS UNDER CONSIDERATION, THE ASSESSEE COMPANY HAD NOT MANUFACTURED ANY PRODUCT AND NOT TRADED IN ANY ITEM AND HAD EARNED I NTEREST ON FDR ONLY. SINCE NO BUSINESS ACTIVITY WAS CARRIED OUT DURING T HE YEARS, THE ASSESSING OFFICER WAS JUSTIFIED IN HOLDING THAT THE QUESTION OF COMPUTATION OF BUSINESS INCOME DID NOT ARISE. HE SUBMITTED FURTHER THAT THE DECISION IN THE CASE OF P.C. BHANDARI & CO. LTD. VS. ACIT, DELHI ITA NO. 1272/2008 AND IN THE CASE OF ANITA JAIN 182 TAXMANN 173 (DEL.) CITED B EFORE THE LEARNED CIT(APPEALS) HAVING DISTINGUISHABLE FACTS ARE NOT H ELPFUL TO THE ASSESSEE. HE 4 SUBMITTED THAT IN THE PRESENT CASE, THE ASSESSEE WA S NOT WAITING FOR PROPER MARKET CONDITIONS INSTEAD THE FACTORY WAS CLOSED FO R THE LAST SO MANY YEARS. 5. THE LEARNED AR ON THE OTHER HAND PLACED RELIANCE ON THE FIRST APPELLATE ORDER AND REITERATED THE DECISIONS CITED BEFORE THE LEARNED CIT(APPEALS) INCLUDING THE DECISION OF DELHI BENCH OF THE ITAT IN THE CASE OF DCIT VS. FORTUNE GARMENTS LTD. (2011) 7 ITR (T RIBUNAL) 243 (DEL.). 6. CONSIDERING THE ABOVE SUBMISSIONS, WE FIND THAT THE ASSESSEE WAS ENGAGED IN MANUFACTURING OF BLACK AND WHITE PICTURE TUBES WHICH WAS DISCONTINUED DUE TO ADVERSE MARKET CONDITION A FEW YEARS AGO. THE ASSESSING OFFICER DISALLOWED THE CLAIMED BUSINESS L OSS DURING THE YEARS UNDER CONSIDERATION ON THE BASIS THAT NO BUSINESS A CTIVITIES WAS CARRIED OUT DURING THE YEAR HENCE THE QUESTION OF COMPUTATION O F BUSINESS INCOME DID NOT ARISE. UNDISPUTEDLY, IT WAS NOT THE CASE OF THE ASSESSING OFFICER THAT EXPENDITURE OF THE ASSESSEE COMPANY WERE EXCESSIVE OR UNREASONABLE VIA-A- VIS ITS LEGITIMATE BUSINESS REQUIREMENTS. THE WHOLE CAUSE OF ACTION OF DISALLOWANCE OF EXPENSES BY THE ASSESSING OFFICER W AS IN THE BACKGROUND OF HIS OBSERVATIONS THAT THE ASSESSEE DID NOT CARRY OU T ANY BUSINESS TRANSACTION. THE CONTENTION OF THE ASSESSEE ON THE OTHER HAND RE MAINED THAT CARRYING ON BUSINESS ACTIVITY IN A PARTICULAR PERIOD CANNOT BE EQUATED WITH CLOSURE OF 5 BUSINESS. RELIANCE WAS PLACED ON SEVERAL DECISIONS INCLUDING THE DECISION IN THE CASES OF P.C. BHANDARI & CO. LTD. VS. ACIT (SUP RA) AND CIT VS. ANITA JAIN (SUPRA), HOLDING THAT UNLESS THE BUSINESS IS A BANDONED OR CLOSED AND EVEN IF BUSINESS IS AT A DORMANT STAGE WAITING FOR PROPER MARKET CONDITION TO DEVELOP, THE EXPENDITURE INCURRED IN THE COURSE OF SUCH A BUSINESS IS TO BE ALLOWED AS DEDUCTION. THE LEARNED CIT(APPEALS) HAS OBSERVED ON PERUSAL OF ASSESSMENT RECORD OF EARLIER YEARS THAT THE ASSESSI NG OFFICER HAD BEEN ASSESSING THE BUSINESS LOSS CLAIMED BY THE ASSESSEE ON ACCOUNT OF ADMINISTRATIVE AND OTHER EXPENSES INCURRED FOR EARL IER YEARS AFTER DUE VERIFICATION OF BOOKS OF ACCOUNT AND RELEVANT DOCUM ENTS, HOWEVER, DURING THE ASSESSMENT YEARS UNDER CONSIDERATION, THE ENTIR E EXPENSES HAVE BEEN DISALLOWED ON THE BASIS THAT THERE HAS BEEN NO MANU FACTURING OR TRADING ACTIVITY DURING THE RELEVANT PREVIOUS YEARS. THE CONTENTION OF THE ASSESSEE BEFORE THE AUTHORITIES BELOW REMAINED THAT THE ASSE SSEE IS A PUBLIC LIMITED COMPANY WHICH HAS STILL NOT WOUND UP. THIS FACT HAS NOT BEEN REBUTTED BY THE REVENUE EVEN BEFORE THE ITAT. FURTHER CONTENTIO N OF THE ASSESSEE REMAINED BEFORE THE AUTHORITIES BELOW THAT FOR THE LAST SEVERAL ASSESSMENT YEARS, THE BUSINESS LOSS HAS BEEN ASSESSED IN THE C ASE OF THE ASSESSEE BY THE ASSESSING OFFICER IN THE SAME CIRCUMSTANCES AS OBTA INING IN THE ASSESSMENT YEARS UNDER CONSIDERATION AND THERE WAS NO REASONAB LE CAUSE FOR A CHANGE OF 6 OPINION BY THE ASSESSING OFFICER. THE LEARNED CIT(A PPEALS) HAS ALLOWED THE CLAIMED EXPENDITURE MAINLY ON THE TWO BASIS. FI RSTLY, THE ASSESSEE, A PUBLIC LIMITED COMPANY HAS STILL NOT WOUND UP AND S ECONDLY FOLLOWING THE PRINCIPLES OF CONSISTENCY, THE ADMINISTRATIVE EXPEN SES INCURRED BY THE ASSESSEE SHOULD HAVE BEEN ALLOWED BY THE ASSESSING OFFICER AS WAS DONE IN SEVERAL ASSESSMENT YEARS IMMEDIATELY PRECEDING THE ASSESSMENT YEARS UNDER CONSIDERATION. THE DELHI BENCH OF THE ITAT IN THE C ASE OF DCIT VS. FORTUNE GARMENTS LTD. (SUPRA) RELIED UPON BEFORE US, THE AS SESSEE COMPANY WAS NEITHER DISSOLVED NOR WAS ITS BUSINESS CLOSED, THE ITAT FOLLOWING SEVERAL DECISIONS OF THE HONBLE COURTS INCLUDING THE DECIS ION OF HON'BLE SUPREME COURT IN THE CASE OF SASSOON J. DAVID & CO. (P) LTD . VS. CIT (1979) 10 CTR (S.C) 383 HELD THAT WHEN THE ASSESSEE COMPANY W AS NEITHER DISSOLVED NOR WAS ITS BUSINESS CLOSED, THE REVENUE AUTHORITIE S WERE UNJUSTIFIED TO DISALLOW THE EXPENSES CLAIMED BY THE ASSESSEE. IN THAT CASE, BEFORE THE HON'BLE SUPREME COURT, THE ASSESSEE COMPANY WAS ENG AGED IN THE BUSINESS OF MANUFACTURE AND EXPORT OF GARMENTS AND CLAIMED E XPENSES OF RS.13,41,135 ON ACCOUNT OF SALARY AND DEPRECIATION. AS PER REVENUE RECORD, THE ASSESSEE COMPANY STARTED ITS BUSINESS IN THE YE AR 1997 AND HAS DONE ITS BUSINESS BUT IN THE YEAR 1999-00 AND IN THE CURRENT YEAR, IT HAD SUFFERED RECESSION AND THE COMPANY COULD NOT PROCURE EXPORT ORDERS IN THE YEAR UNDER 7 CONSIDERATION, BUT THE COMPANY CLAIMED ONLY THOSE E XPENSES WHICH WERE NECESSARY TO MAINTAIN THE BUSINESS AND ASSETS OF TH E COMPANY WHICH WERE ALLOWABLE UNDER THE INCOME-TAX ACT, 1961. ALMOST SI MILAR ARE THE FACTS OF THE PRESENT CASE DURING THE YEARS UNDER CONSIDERATI ON AS IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT THE EXPENDITURE OF THE A SSESSEE WERE EXCESSIVE OR UNREASONABLE VIS--VIS ITS LEGITIMATE BUSINESS REQU IREMENTS BUT THE CLAIMED EXPENDITURE HAS BEEN DENIED BY THE ASSESSING OFFICE R ON THE BASIS THAT IT HAD NOT MANUFACTURED ANY PRODUCT AND NOT TRADED IN ANY ITEM AND IT HAD ONLY EARNED INCOME FROM INTEREST ON FDR. UNDER THE ABOVE DISCUSSED FACTS AND CIRCUMSTANCES AS WELL AS THE RATIOS LAID DOWN IN TH E ABOVE CITED DECISIONS, WE ARE OF THE VIEW THAT THE LEARNED CIT(APPEALS) WA S JUSTIFIED IN ALLOWING THE CLAIMED EXPENDITURE WHICH WERE DISALLOWED BY TH E ASSESSING OFFICER BASED ON A WRONG VIEW. WE ARE THUS NOT INCLINED TO INTERFERE WITH THE FINDINGS OF THE LEARNED CIT(APPEALS) IN THIS REGARD . THE SAME IS UPHELD. THE GROUND IS ACCORDINGLY REJECTED. 7. IN RESULT, APPEALS ARE DISMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 23.04.201 5 SD/- SD/- ( R.S. SYAL ) ( I.C. SUDHIR ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 23 /04/2015 MOHAN LAL 8 COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT(APPEALS) 5) DR:ITAT ASSISTANT REGISTRAR DATE DRAFT DICTATED ON COMPUTER 23.04.2015 DRAFT PLACED BEFORE AUTHOR 23.04.2015 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 23.04.2015 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. APPROVED DRAFT COMES TO THE SR.PS/PS 24.04.2015 KEPT FOR PRONOUNCEMENT ON 23.04.2015 FILE SENT TO THE BENCH CLERK 24.04.2015 DATE ON WHICH FILE GOES TO THE AR DATE ON WHICH FILE GOES TO THE HEAD CLERK. DATE OF DISPATCH OF ORDER.