TaxTMI 
TaxTMI 
TaxTMI 
2009 (5) TMI 840
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....he reason that the Securities and Exchange Board of India has given instructions not to operate business and has also cancelled the registration of the assessee being involved in share scam. The Commissioner of Income-tax (Appeals) has also confirmed the action of the Assessing Officer for both these years. Now, the assessee is in appeal here before the Tribunal for both these years. Learned counsel for the assessee, who appeared before the Tribunal stated that no doubt Securities and Exchange Board of India has imposed restriction not to do any business activity because of alleged involvement in share scam. No doubt that the registration has also been cancelled by the Securities and Exchange Board of India, however, the direction of the Securities and Exchange Board of India in respect of not doing business activity and against cancelling of registration have been challenged by the assessee before the appropriate authorities which are still pending. It was further submitted that, the assessee was forced not to do any business activity ; however, the assessee has to discharge its liability towards payment of interest and salary of employees and various other expenses incurr....
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....rding the depreciation on the BSE card, it was submitted that the same was not used at all, therefore, depreciation cannot be allowed, if the asset is not used. Reliance was placed on various case laws reported in Chinai and Co. Pvt. Ltd. v. CIT [1994] 206 ITR 616 (Bom), CIT v. Gemini Cashew Sales Corporation [1967] 65 ITR 643 (SC), 194 ITR 334 ; Nathalal Asharam v. CIT [1992] 194 ITR 110 (Guj), CIT v. K. B. Kalikutty [1969] 73 ITR 533 (SC), CIT (Central) v. Moon Mills Ltd. [1967] 65 ITR 630 (SC) and CIT v. Lahore Electric Supply Co. Ltd. [1966] 60 ITR 1 (SC). In counter reply, learned counsel for the assessee stated that, various case laws relied upon by the learned Departmental representative are distinguishable on facts. For example, in the case reported in Chinai and Co. Pvt. Ltd. v. CIT [1994] 206 ITR 616, it was held by the hon'ble Bombay High Court that the assessee has made only investment and no activity has been done ; therefore, no expense can be allowed. Similar view has been taken in other cases also ; therefore, these cases are not applicable on the facts of the present case. Reliance was also placed in the case of CIT v. Rajendra Prasad Moody reported in [197....
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....ibunal is placed at page 94 of the paper book. In view of these facts and circumstances, the assessee was not allowed to do its business activity in share on the stock exchange floor. Not doing business activity was not on account of the assessee's will but on account of forced circumstances ; therefore, it cannot be said that the assessee has closed/discontinued its business activity on its own. The establishments of the assessee were intact and they were to be maintained. Staff members were kept and salaries were paid to them. Loans taken from various banks and others for the purpose of business activity in the past were outstanding during the year under consideration ; therefore, any interest, accrued was to be paid during the year under consideration or was payable. The assessee is having a valid BSE card which could not be used for the reason that the Securities and Exchange Board of India has passed an order barring the assessee not to do any business activity. Therefore, it also cannot be said that the assessee could not use the BSE card on its own which was ready to use. In these circumstances, we are of the considered view that the assessee's business does not come to an ....
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....ad view of the matter and had held in favour of the assessee. There was no ground to differ." The facts before the hon'ble High Court were that the assessee was a private electric company. Its undertaking vested with the State Government by reason of the enactment of the Tamil Nadu Electricity Supply Undertakings (Acquisition) Act, 1973. After an unsuccessful attempt to challenge the validity of that Act in the High Court, the assessee had filed appeals before the Supreme Court which were pending during the relevant years, i.e., the assessment years 1975-76 to 1979-80. The Assessing Officer held that the assessee was not carrying on any business and limited the salary paid to the employees of the assessee to 10 percent and the audit fee was limited to 15 percent That was affirmed by the appellate authority. However, the Tribunal held that the assessee was carrying on business and was entitled to the deductions claimed by the assessee. On reference, the hon'ble Madras High Court affirmed the view taken by the Tribunal. The ratio of the decision of the hon' ble Madras High Court is squarely applicable on the facts of the present case as in the present case also the assessee ....
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....id out wholly and exclusively for the purpose of its business and were deductible under section 10(2)(xv)." It was further held that (headnote of 63 ITR) : "the question of admissibility under section 10(2)(xv) had to be decided not on what was found or observed by the High Court in appeal from the order in the proceedings under section 45 of the Specific Relief Act or by the Privy Council but upon the findings of fact recorded by the Tribunal. Expenditure incurred to resist in a civil proceedings the enforcement of a measure, legislative or executive, which imposes restrictions on the carrying on of a business, or to obtain a declaration that the measure is invalid, would, if other conditions are satisfied, be admissible as a deduction under section 10(2)(xv)." The ratio of the decision of the apex court also goes in favour of the assessee as the litigation expenses incurred in respect of its business were held as business expenditure. In the present case also all the expenses incurred are connected with the business of the assessee only, therefore, the expenses claimed by the assessee are allowable. In the case of Marine Labour Supplying Co. decided in I. T. A. Nos. ....