TaxTMI 
TaxTMI 
TaxTMI 
2011 (3) TMI 426
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....osses and unabsorbed depreciation allowances of earlier years while computing the taxable total income against the income determined after disallowing appellants' claim in respect of depreciation allowance and various expenses. 2. The appellant submits that the Assessing Officer be directed to allow set off of brought forward losses and unabsorbed depreciation allowances of earlier years." 2. Facts of the case in brief are that the assessee-company was incorporated in Israel and is a tax resident of Israel having its branch office at Mumbai. The main business of the branch office was trading in rough diamonds i.e., import of rough diamonds and sale thereof in the Indian market. It appears that the assessee-company carried on the trading activity and it was accordingly assessed to tax from year to year upto the assessment year 2003-2004, having obtained the approval from RBI in 1999 to carry on its trading activity in India. In the preceding assessment year as well as in the year under consideration assessee had not carried on any activity concerning import and sale of rough diamonds. Page 13 of the paper book (P and L a....
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....which the expenses have been incurred, should be carried on by the assessee during the previous year. Hence the contention of the assessee is rejected and this amount of Rs.53,132/-, a break up of which is given below, is added back to the total income of the assessee. Bank Charges : Rs. 1,602/- Membership and subscription : Rs. 5,000/- Legal and Professional charges : Rs.15,000/- Audit Fees : Rs.16,530/- Professional fees : Rs.15,000/- Total : Rs.53,132/- Out of the same, an amount of Rs.16,530/- on account of audit fees has already been added back by the assessee u/s. 40(a)(ia) for want of TDS and hence a further quantum addition of Rs.36,602/- to the total income of the assessee. 4. Claim of depreciation. 4.1. The assessee has debited an amount of Rs.20,46,838/- on account of depreciation into the profit and loss account and has, in the computation of income, claimed depreciation to the tune of Rs.33,48,549/-, computed as per the provisions of the Income-tax Act. Vide notice u/s. 142 (1) dated 31-10-2007 the assessee was asked to explain as to why this expense was allowable in view of the fact that no busine....
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....nbsp; 5. With regard to claim of deduction towards depreciation learned CIT(A) has taken into consideration an additional factor to uphold the Order of the Assessing Officer and in this regard he observed as under: "3. I have gone through the facts of the case. Let me take the disallowance of depreciation first. I have gone through the profit and loss A/c. of the appellant. I could not find any expenses such as electricity charges, repair charges, water charges and security charges etc., with regard to the building. This clearly shows that the building was not at all used. This is the position in the earlier year also. In view of this, I hold that the building is not at all used for appellant's business purposes. In view of this, I uphold the Assessing Officer's action in disallowing the claim of depreciation expenses." 6. Aggrieved, assessee is in appeal before us. Learned Counsel, appearing on behalf of the assessee, submitted that the Assessing Officer was not justified in disallowing the claim of depreciation of Rs.33,48,549/-. Adverting our attention to the Order of the Assessing Officer learned Counsel, appearing on behalf of the assessee, submitted that the ....
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....g that the business was actually closed for the year under consideration but merely based upon the letter addressed to RBI in 2007; a letter addressed subsequent to the assessment year under consideration cannot be taken as the basis to hold that in the preceding year also there was no intention to carry on the business. Similarly, the learned CIT(A) was not justified in holding that in the absence of any expenditure towards electricity charges etc., with regard to the building it can be concluded that the assessee did not intend to carry on business; The fact that the assessee continues to pay professional tax etc., indicate that it intended to carry on business. Subsequent events should not be taken into consideration to hold that even in the earlier years the assessee never intended to carry on business. He also stressed upon the fact that the Assessing Officer having assessed to tax a sum of Rs.11,25,000/- under the head "Income from business", referable to exchange fluctuation gain, he cannot now contend that the assessee is not carrying on business activity. He also submitted that when there is a business activity depreciation claimed by the assessee ought to have been allowe....