RAC Engineers & Exporters Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 6468/DEL/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1374 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-03-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 28-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: O P MODY
• Section: 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : SMC: NEW DELHI SHRI I. C. SUDHIR, JUDICIAL MEMBER ITA NO. 6468/DEL/2012 ASSESSMENT YEAR: 2009- 2010 M/S. RAC ENGINEERS AND VS. ITO, WAR D NO. 15(1) EXPORTERS PVT. LTD., W ARD NO. 15(1), FLAT NO. 111, COMPETENT HOUSE, NEW DELH I. F-14, CONNAUGHT PLACE NEW DELHI. (PAN AAACD0008J) (APPELLANT) (RES PONDENT) APPELLANT BY : SHRI O.P. MODY , ADVOCATE RESPONDENT BY : NONE ORDER THE ASSESSEE HAS QUESTIONED FIRST APPELLATE ORDER ON THE SOLE GROUND THAT LD. CIT(A) HAS ERRED IN UPHOLDING THE DISALLOW ANCE OF RS. 14,57,085/- MADE BY THE AO. 2. I HAVE HEARD THE LD. AR AND CONSIDERED HIS A RGUMENTS IN VIEW OF THE ORDERS OF THE LOWER AUTHORITIES AND THE DECISIONS R ELIED UPON BY HIM. 3. THE RELEVANT FACTS ARE THAT THE ASSESSEE IN THE BUSINESS OF IMPORT AND EXPORT OF AGRO PRODUCTS INCLUDING SOYA BEENS MEAL, RICE WHEAT TEA AND SUGAR ETC. HAD CLAIMED EXPENSES OF RS. 14,57,085/- IN ITS PROFIT AND LOSS ACCOUNT FOR THE YEAR UNDER CONSIDERATION. BESIDES I T HAS SHOWN ONLY INCOME FROM HOUSE PROPERTY TO THE TUNE OF RS. 2,68,100/- A FTER AVAILING THE ITA NO. 6468/DEL/2012 2 DEDUCTION U/S 241(1) OF THE ACT. THE AO REQUIRED TH E ASSESSEE TO SHOW CAUSE AS TO WHY ALL EXPENSES SHOULD NOT BE DISALLOW ED AS THERE WAS NO BUSINESS ACTIVITIES DURING THE YEAR UNDER CONSIDERA TION. THE AO WAS NOT SATISFIED WITH THE CAUSE SHOWN BY THE ASSESSEE IN T HIS REGARD AND DISALLOWED THE CLAIMED EXPENSES ON THE BASIS THAT T HERE WAS NO BUSINESS ACTIVITY DURING THE YEAR. THE SAME WAS UPHELD BY TH E LD. CIT(A). THE LD. AR BEFORE THE TRIBUNAL HAS REITERATED SUBMISSIONS M ADE BEFORE THE AUTHORITIES BELOW IN THIS REGARD. HE SUBMITTED THAT DUE TO GOVT. POLICY SOME AGRICULTURAL PRODUCTS WAS BANNED FOR EXPORT SINCE 2 006. AWAITING REMOVAL OF THE BAN THE ASSESSEE OPTED NOT TO APART WITH ITS OL D AND LOYAL EMPLOYEES WHO REMAINED SINCERE TO THE ASSESSEE COMPANY AND WE RE WELL-CONVERSANT WITH ITS BUSINESS. THE DAY TO DAY MAINTENANCE OF TH E ESTABLISHMENT WAS ALSO REQUIRED TO KEEP THE ORGANISATION ALIVE. IN TH E YEAR UNDER CONSIDERATION THE GOVT. OF INDIA HAD REMOVED THE BAN ON CERTAIN P RODUCTS AND THE ASSESSEE WAS PLANNING TO RESTART / RESUME THE BUSIN ESS ACTIVITIES AS SOON AS POSSIBLE. THE LD. AR SUBMITTED THAT THOUGH THE ASSE SSEE WAS NOT ABLE TO EXECUTE ITS BUSINESS FOR A LONG DURATION BUT IT MA Y BE DEEMED TO CARRY ON THE BUSINESS IF DURING THE PERIOD OF LULL AND INACT IVITY IT IS KEPT ALIVE AND RETAINED ITS OFFICE. HE PLACED RELIANCE ON THE FOLL OWING DECISIONS :- ITO VS. MOKUL FINANCE (P) LTD. 110 TTJ (DELHI) 445 L.VE. VAIRAVAN CHETTIAR VS. CIT 72 ITR 114 (MADRAS ) ITA NO. 6468/DEL/2012 3 4. HE HAS ALSO REFERRED PAGE NOS. 1 TO 45 OF TH E PAPER BOOK UNDER THE CERTIFICATE THAT THESE DOCUMENTS WERE MADE AVAILABL E BEFORE THE AO. THESE ARE COPIES OF BALANCE SHEET, PROFIT AND LOSS ACCOUN T , SCHEDULES OF THE ASSESSEE COMPANY FOR THE YEAR DATED 31.3.2009 COMPU TATION OF THE INCOME FOR THE ASSESSMENT YEAR 2009-10 BALANCE SHEET, PRO FIT AND LOSS ACCOUNT AND SCHEDULES OF THE ASSESSEE COMPANY FOR THE YEAR ENDED 31.3.2007. HE INFORMED FURTHER THAT VIDE NOTIFICATION NO. 72 (RE) 2010)/2009 -2014 DATED 9 TH SEPTEMBER 2011 THE GOVT. OF INDIA, MINISTRY OF COM MERCE AND INDUSTRY HAS BEEN PLEASED TO REMOVE BAN ON EXPORT OF WHEAT. 5. CONSIDERING ABOVE SUBMISSIONS I FIND THAT T HE AUTHORITIES BELOW HAD DISALLOWED THE CLAIMED EXPENDITURE OF RS. 14,57,085 /- INCURRED MAINLY ON SALARY OF THE EMPLOYEES ETC. ON THE BASIS THAT DURI NG THE YEAR THE ASSESSEE HAD NO BUSINESS ACTIVITY AND INCOME FROM HOUSE PROP ERTY WAS ASSESSED AFTER STATUTORY DEDUCTION U/S 24 (1) OF THE ACT. TH E CITED DECISION OF DELHI BENCH OF TRIBUNAL IN THE CASE OF ITO VS. MOKUL FINA NCE (P) LTD. (SUPRA) HAS DEALT WITH THE ISSUE IN DETAIL AND FOLLOWING SEVERA L DECISIONS IN THIS REGARD HAS HELD THAT UNLESS THE BUSINESS IS ABANDONED OR C LOSED AND EVEN IF BUSINESS IS AT A DORMANT STAGE HOLDING FOR PROPER M ARKET CONDITIONS TO DEVELOP, THE EXPENDITURE INCURRED IN THE COURSE OF SUCH BUSINESS IS TO BE ALLOWED AS DEDUCTION. IN THE PRESENT CASE BEFORE US IT IS NOT A CASE OF REVENUE THAT ASSESSEE HAD COMPLETELY ABANDONED OR C LOSED THE BUSINESS FOREVER. THE HONBLE MADRAS HIGH COURT IN THE CASE OF L.VE. VAIRAVAN ITA NO. 6468/DEL/2012 4 CHETTIAR VS. CIT (SUPRA) HAS BEEN PLEASED TO HOLD T HAT MERE INACTIVITY FOR A PERIOD DOES NOT MEAN THAT IT IS THE BUSINESS CEASED TO EXIST OR THAT IT DID NOT CARRY ON BUSINESS AT ALL, A BUSINESS MAY BE INA CTIVE FOR A PERIOD AND MERELY BECAUSE OF THE DORMANCY OF THE BUSINESS, THE CONCLUSION THAT IT HAS CEASED DOES NOT ARISE. RESPECTFULLY FOLLOWING THESE DECISIONS I AM OF THE VIEW THAT IN ABSENCE OF A POSITIVE FINDING ON RECOR D THAT THE ASSESSEE HAD COMPLETELY ABANDONED OR CLOSED ITS BUSINESS FOREVER , THE AO WAS NOT JUSTIFIED IN DISALLOWING THE CLAIMED EXPENSES INCUR RED DURING THE YEAR MERELY ON THE BASIS THAT THE ASSESSEE HAD NOT DONE ANY BUSINESS IN THIS PERIOD. WHILE SETTING ASIDE ORDERS OF THE AUTHORITI ES IN THIS REGARD I DIRECT THE AO TO DELETE THE DISALLOWANCE OF RS. 14,57,058/ -, THE CLAIMED EXPENSES INCURRED DURING THE YEAR. THE GROUND IS ACCORDINGL Y ALLOWED. 6. CONSEQUENTLY APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH MARCH, 2013 SD/- ( I.C. SUDHIR ) JUDICIAL MEMBE R DATED 15 TH MARCH, 2013 *VEENA COPY OF ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER DEPUTY REGISTRAR, ITAT