Deputy Commissioner Of Income Tax vs Patidar Ginning & Pressing Co. on 26 October, 1999
10. Further, Hon'ble Gujarat High Court in CIT Vs Patidar Ginning & Pressing
Co.(supra), while considering the facts that the assessee-company had a
ginning mill. Due to financial difficulties the assessee stopped its activities
of ginning and pressing and before commencement of the year engaged
itself in purchasing and selling of cotton. However, the selling of cotton was
not different from the activity of selling cotton after ginning and pressing.
Both the activities were conducted by the same management with the help
of the same funds under the same control. The assessee claimed the fact that
closure of one business did not affect or lead to closure of other business,
was not of much consequence when different activities were carried out by
the assessee. The case of the assessee was that all activities constituted one
and the same business and the write off of its outstanding dues as bad debts
were allowable deductions. The Assessing Officer, disallowed the
assessee's claim by taking view (i) that the assessee had stopped its ginning
and pressing business and after sometime as new business activities had
commenced, and (ii) that suits had been filed for recovery of amount. The
Tribunal allowed the deduction claimed on the ground that old business
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ITA No. 5375 Mum 2016-Manoj Shivyag Singh
should be deemed to continue despite its closure, as per the resolution of the
board of directors, and that it was enough if the assessee wrote off the debt
as bad in its books of account and the assessee need not establish the debt to
have become bad.