Income Tax Appellate Tribunal - Delhi
Tosha International Ltd,, New Delhi vs Department Of Income Tax on 23 April, 2015
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, 2nd Floor, Con. Place,
New Delhi. New Delhi.
(PAN: AAACT4538K)
(Appellant) (Respondent)
Appellant by: Shri R.C. Rai, CA
Respondent by: Shri J.P. Chandrakar, 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 following common ground that:
the Learned CIT(Appeals) erred in law and on the facts of the case in allowing the claim of the assessee in respect 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 loss account because:
i) the assessee has not carried out any business activities during the year under consideration.
ii) The assessee has not carried out any business activity since 1996-97;2
iii) Even in the later year no business activity has been 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 has stopped the business for good from 1996-97."
2. Heard and considered the arguments advanced by the parties in view of orders of the authorities below, material available on record and the decisions relied upon.
3. The facts in brief are that in the assessment year 2008-09, the assessee has computed business loss amounting to Rs.34,05,956 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 computation of income filed. As per profit and loss account, no sale or purchase 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 interest on FDR during the year. The Assessing Officer was of the view that since no business activity was carried out during the year, the question of computation of business income did not arise. He, therefore, ignored the loss declared at 3 Rs.17,88,199 and assessed the net business income of the assessee at nil. The Learned CIT(Appeals) has, however, allowed the claimed expenses incurred by the assessee to the tune of Rs.17,88,199. Against this action of the Learned CIT(Appeals), the Revenue is in appeal. Likewise in the assessment year 2009-10, the assessee had claimed business expenses amounting to Rs.12,99,874 which was disallowed by the Assessing Officer on the basis that no business activities was carried out and income from interest on bank FDR amounting to Rs.6,923 was assessed 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 reiterated 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 interest on FDR only. Since no business activity was carried out during the 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 before the Learned CIT(Appeals) having distinguishable facts are not helpful to the assessee. He 4 submitted that in the present case, the assessee was not waiting for proper market conditions instead the factory was closed for 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 (Tribunal) 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 loss during the years under consideration on the basis that no business activities was carried out during the year hence the question of computation of 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 was in the background of his observations that the assessee did not carry out any business transaction. The contention of the assessee on the other hand remained 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 (supra) and CIT vs. Anita Jain (supra), holding that unless the business is abandoned 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 Assessing Officer had been assessing the business loss claimed by the assessee on account of administrative and other expenses incurred for earlier years after due verification of books of account and relevant documents, however, during the assessment years under consideration, the entire expenses have been disallowed on the basis that there has been no manufacturing or trading activity during the relevant previous years. The contention of the assessee before the authorities below remained that the assessee 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 contention of the assessee remained before the authorities below that for the last several assessment years, the business loss has been assessed in the case of the assessee by the Assessing Officer in the same circumstances as obtaining in the assessment years under consideration and there was no reasonable cause for a change of 6 opinion by the Assessing Officer. The Learned CIT(Appeals) has allowed the claimed expenditure mainly on the two basis. Firstly, the assessee, a public limited company has still not wound up and secondly following the principles of consistency, the administrative expenses 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 case of DCIT vs. Fortune Garments Ltd. (supra) relied upon before us, the assessee company was neither dissolved nor was its business closed, the ITAT following several decisions of the Hon'ble Courts including the decision 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 was neither dissolved nor was its business closed, the Revenue Authorities were unjustified to disallow the expenses claimed by the assessee. In that case, before the Hon'ble Supreme Court, the assessee company was engaged in the business of manufacture and export of garments and claimed expenses of Rs.13,41,135 on account of salary and depreciation. As per revenue record, the assessee company started its business in the year 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 expenses which were necessary to maintain the business and assets of the company which were allowable under the Income-tax Act, 1961. Almost similar are the facts of the present case during the years under consideration as it is not the case of the Assessing Officer that the expenditure of the assessee were excessive or unreasonable vis-à-vis its legitimate business requirements but the claimed expenditure has been denied by the Assessing Officer 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 the above cited decisions, we are of the view that the Learned CIT(Appeals) was justified in allowing the claimed expenditure which were disallowed by the 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 23.04.2015 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 23.04.2015 member 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.