2011 (12) TMI 48
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.... and there were no purchases or sales or manufacturing activities carried on by the assessee. He further noted that the expenses debited above included depreciation, bad debts, raw material stock written off and administrative expenses. According to the Assessing Officer the expenses were not allowable in computing the business income of the assessee because no business activities were carried on in the relevant previous year. He therefore, proposed to disallow the expenditure claimed by the assessee. In response thereto, the assessee submitted that the administrative expenses were statutory in nature and not related to any business carried on by the assessee and such expenses as were incurred for complying with the legal and statutory requirements under various laws were allowable as deduction. 3. The Assessing Officer was not convinced by the submission of the assessee. According to him the expenses claimed by the assessee in the profit and loss account were not allowable in the absence of any business carried on by the assessee in the relevant previous year. With particular reference to the assessee's claim of depreciation, he observed that since the plant and machinery ....
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....he manufacture of printed circuit boards and for the assessment years 2000-01, 2001-02, 2002-03 and 2003-04 it had turnover amounting to Rs.0.3 crores, Rs.0.55 crores, Rs.1.87 crores and Rs.0.68 crores respectively. In these years there were net losses as per the accounts and the accumulated losses as on 31.3.2003 came to Rs.13.44 crores. b) Since the accumulated loss exceeded the paid-up capital and free reserves of Rs.10.76 crores, the BIFR had registered the assessee's case as case No.165/2004. In this application to the BIFR the assessee had pointed out that though the annual capacity for manufacture of printed circuit boards was 54,000 sq.mts, the assessee could manufacture only 568 sq.mts and 5409 sq.mts in the earlier years. c) The reason for the assessee becoming sick was the cancellation of orders from international customers subsequent to the terror attacks in USA, and the assessee's inability to accept orders for domestic markets because it was a hundred per cent export oriented unit and also insufficient working capital. d) Although there was no production up to 31.3.2007, in the application for admission of its case before the BIFR the assessee ....
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....cording to the Tribunal, the assessee had purchased new plant and machinery in the relevant previous year, had incurred expenses of Rs.1.23 lakhs on account of repairs and maintenance and also purchased consumable stores for Rs.27,131/-. In addition to these expenses, it was noted by the Tribunal that the assessee had incurred expenses of Rs.14.04 lakhs on account of salary, allowances and staff welfare expenses as against Rs.5.14 lakhs incurred in the preceding year. It was observed by the Tribunal that the CIT (Appeals) has allowed deduction of these expenses namely salary, allowance and staff welfare expenses as also the repairs and maintenance and expenses on consumable stores. This, according to the Tribunal, also supported the assessee's plea that it was making all efforts to revive the business and was keeping the plant and machinery and other assets ready for use. Moreover, the revenue had not filed any appeal to the Tribunal questioning the decision of the CIT (Appeals) allowing deduction on account of various expenses such as salary and allowance, staff welfare, repairs and maintenance etc. The Tribunal has also dealt with the argument of the department that since the ass....
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....he assessee had purchased new plant and machinery and had also incurred repair expenditure of Rs.1.23 lakhs in respect of the existing machinery, it is a fair and reasonable inference to draw that the assessee wants to keep the business alive and revive the same at the earliest opportunity. The assessee has also stated before the BIFR that after the change in the business scenario globally, the company is expecting to receive substantial orders for its products. Thus, the finding of the Tribunal that the business of the assessee was not closed is fully supported by facts on record which have not been challenged by the revenue. The other question as to whether the plant and machinery should have been actually put to use in order to be entitled to depreciation under Section 32 and that mere passive use, in the sense that they were kept ready for use as and when the business was revived, would be sufficient compliance with Section 32 should not detain us since it has already been decided in the affirmative by at least three judgments of this Court. 9. The Tribunal has referred to the judgments in Capital Bus Service (supra), CIT Vs. Refrigeration and Allied Industries Ltd. (supra) & ....