Solaris Industrial Chemicals Ltd., New Delhi V. ITO, New Delhi

ITA 6061/DEL/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0095 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 14-03-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 30-12-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUJANI MOHANTY
• Assessee Lawyers: AKHIL MAHAJAN
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `G: NEW DELHI BEFORE SHRI C.L.SETHI, JUDICIAL MEMBER AND SHRI K.G. BANSAL, ACCOUNTANT MEMBER I.T. A. NO.6061/DEL/2010 ASSESSMENT YEAR : 2006-07 SOLARIS INDUSTRIAL CHEMICAL LTD., INCOME-TAX OFFIC ER, 124, JANPATH, THAPAR HOUSE, VS. WARD 9(1), NEW DEL HI. NEW DELHI. PAN: AAICS4672H (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI AKHIL MAHAJAN, CA. RESPONDENT BY: SMT. SUJANI MOH ANTY, DR. O R D E R PER C.L. SETHI, JUDICIAL MEMBER: THE ASSESSEE IS IN APPEAL AGAINST THE COMMISSIONER OF INCOME-TAX (APPEALS)S ORDER DATED 25.10.2010 IN DISALLOWING E XPENSES OF RS.31,683/- ON ACCOUNT OF ADMINISTRATIVE AND OFFICE EXPENSES AN D DISALLOWANCE OF DEPRECIATION OF RS.10,670/- ON VEHICLE IN THE ABSEN CE OF ANY BUSINESS BEING CARRIED OUT DURING THE YEAR UNDER CONSIDERATION. 2. THE ASSESSEE FILED ITS RETURN OF INCOME ON 23.11 .2006 DECLARING LOSS OF RS.42,353/- WHICH INCLUDES THE SUM OF RS.31,683/- O F ADMINISTRATIVE AND OFFICE EXPENSES AND RS.10,670/- BEING CLAIM OF DEPR ECIATION ON VEHICLE PURCHASED DURING THE YEAR UNDER APPEAL. THE ASSESS EE HAS NOT SHOWN ANY 2 RECEIPT FROM THE BUSINESS. THE AO HAS STATED THAT THE ASSESSEE HAS NOT SHOWN ANY BUSINESS DURING THE YEAR. HE, THEREFORE, DISALLOWED ADMINISTRATIVE AND OFFICE EXPENSES AS WELL AS DEPRE CIATION ON VEHICLE AFTER FOLLOWING THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF INTERNATIONAL MARKETING LTD. VS. ITO, 292 ITR 504 ( DELHI). THE CIT(A) CONFIRMED THE AOS ACTION FOR THE REASONS GIVEN BY THE AO AND AFTER FOLLOWING THE AFORESAID DECISION OF HONBLE DELHI H IGH COURT. HENCE, THE ASSESSEE IS IN APPEAL BEFORE US. 3. WE HAVE HEARD BOTH THE PARTIES AND HAVE PERUSED THE MATERIAL ON RECORD. 4. THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITT ED THAT THE ADMINISTRATIVE AND OFFICE EXPENSES AS WELL AS DEPRE CIATION WERE INCURRED FOR MAINTAINING THE STATUS OF THE COMPANY AND THEREFORE , THE ASSESSEES CLAIM OF EXPENSES AND DEPRECIATION IS TO BE ALLOWED. 5. THE LEARNED DR ON THE OTHER HAND, SUBMITTED THAT THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF INTERNATION AL MARKETING LTD. VS. ITO (SUPRA) SUPPORTS THE REVENUES CASE. 6. IN THE CASE OF INTERNATIONAL MARKETING LTD. VS. ITO (SUPRA), THE HONBLE DELHI HIGH COURT HAS OBSERVED THAT AS NO BU SINESS HAD BEEN TRANSACTED, THERE WAS NO QUESTION OF ALLOWING ANY E XPENSES IN RELATION 3 THERETO. THEY FURTHER OBSERVED THAT, HOWEVER, THE TRIBUNAL HAD ALLOWED SOME EXPENSES TO THE COMPANY FOR MAINTAINING ITS ST ATUS AND DEDUCTED THEM OUT OF THE INCOME FROM OTHER SOURCES WHICH ON A STR ICT INTERPRETATION OF LAW MAY NOT BE ADMISSIBLE TO IT. SINCE THERE WAS NO AP PEAL FILED BY THE REVENUE AGAINST THE ORDER PASSED BY THE TRIBUNAL ALLOWING S OME EXPENSES TO THE COMPANY FOR MAINTAINING ITS STATUS, THE HONBLE HIG H COURT FOUND NO REASON TO INTERFERE WITH THE GRANT OF THAT RELIEF. THIS C LEARLY SHOWS THAT THE TRIBUNALS ORDER ALLOWING SOME EXPENSES TO THE COMP ANY FOR MAINTAINING ITS STATUS WAS NOT INTERFERED WITH BECAUSE OF THE REASO N THAT THERE WAS NO APPEAL FILED BY THE REVENUE BUT THE HONBLE HIGH COURT WAS OF THE VIEW THAT ON STRICT INTERPRETATION OF LAW, SOME EXPENSES TO THE COMPANY FOR MAINTAINING ITS STATUS MAY NOT BE ADMISSIBLE TO IT. IN THE PR ESENT CASE, IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS NOT DONE ANY BUSINESS. IT WA S INCORPORATED ON NOVEMBER 10, 2003 FOR THE PURPOSE OF MANUFACTURE AN D SALE OF CHEMICALS BUT NO BUSINESS ACTIVITY HAS EVER STARTED BY THE AS SESSEE SINCE INCORPORATION OF THE COMPANY. THE ASSESSEE HAS ALSO NOT EARNED A NY OTHER INCOME FROM OTHER SOURCES. IT IS NOT IN DISPUTE THAT THE ASSES SEE HAS INCURRED SOME EXPENSES, WHICH HAS BEEN CLAIMED AS DEDUCTION. THE QUESTION IS NOT WHETHER THE ASSESSEE HAS ACTUALLY INCURRED THE EXPENDITURE OR NOT, BUT THE QUESTION IS WHETHER THE EXPENSES ACTUALLY INCURRED BY THE ASSES SEE CAN BE ALLOWED AS 4 DEDUCTION IN THE EYES OF LAW. IN THE CASE OF INTER NATIONAL MARKETING LTD. VS. ITO (SUPRA), THE TRIBUNAL ALLOWED SOME EXPENSES TO THE COMPANY FOR MAINTAINING ITS STATUS AND ALLOWED THE SAME TO BE D EDUCTED OUT OF THE INCOME FROM OTHER SOURCES BUT THE HONBLE HIGH COURT HAS M ADE OBSERVATION OTHERWISE. THOUGH THE ASSESSEES STAND MAY BE BONA FIDE BASED ON ACTUAL EXPENDITURE INCURRED BY IT, BUT THE SAME IS NOT TEN ABLE IN THE EYES OF LAW. IN THIS VIEW OF THE MATTER, THE LEARNED CIT(A) HAS RIG HTLY UPHELD THE AOS ACTION IN DISALLOWING THE ADMINISTRATIVE AND OFFICE EXPENSES AS WELL AS DEPRECIATION ON VEHICLE. WE, THEREFORE, UPHOLD TH E ORDER OF THE CIT(A) AND REJECT THIS APPEAL FILED BY THE ASSESSEE. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. 8. THIS DECISION IS PRONOUNCED IN THE OPEN COURT O N 18 TH MARCH, 2011. SD/- SD/- (K.G. BANSAL) (C.L. SETHI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 18 TH MARCH, 2011. COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR BY ORDER *MG DEPUTY REGISTRAR, ITAT.