TaxTMI 
TaxTMI 
2014 (2) TMI 1068
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....nd in the circumstances of the case, the ld. CIT(A)-XXVI, New Delhi has erred in law and on facts in only allowing expenditure totaling to Rs.13,450 instead of allowing the entire business loss amounting to Rs.23,82,956/-. 2. Whether on the facts and in the circumstances of the case, the ld. lower authorities has grossly erred in law and on facts in holding that no business was carried out by the assessee as such the expense incurred including deprecation etc. were not allowable during the year under consideration." 3. Briefly stated the facts giving rise to this appeal are that during the year under consideration, the assessee was engaged in manufacturing and trading of tobacco products etc. The assessee filed return of income on 26.....
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.... and closing balance of raw material and packing material and assessee was maintaining entire infrastructure including plant, machinery, furniture and fixtures and assessee was intending to continue with the business of the company and there was no intention to shut down business. The counsel further pointed out Schedule VI of the final accounts and submitted that a huge amount of assessee was blocked with unsecured debtors and amount could not be recovered despite best efforts, therefore, due to lack of cash flow and capital, the assessee company could not conduct any business activities of manufacturing and trading during the financial year under consideration. But the assessee company had always an intention to continue its business wait....
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....d the amount that an assessee receives, does not bear the character of profit of the business. The DR further submitted that in order to sustain a claim for deduction by way of business expenditure, the expenditure must have been incurred for the purpose of business which was in existence during the year of account and the profits on which are under assessment. The DR also contended that if during the relevant financial period, no business was carried on by the assessee, then no question of computation of its income after deduction of expenses can possibly arise. The DR supported the orders of the authorities below and submitted that the Commissioner of Income Tax(A) was quite liberal in allowing the expenses of the auditors' remuneration a....
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....ld that since the company has to fulfill its obligations imposed by the Company's Act till it is wound up, some staff has to be maintained, therefore, once the assessee company is in existence, then it is entitled to depreciation though it has discontinued its business. 9. In our considered view, this is a settled legal proposition that the intention to conduct business activity is a paramount factor for examining the claim of the assessee in regard to expenses and depreciation. In the present case, admittedly, the assessee company did not carry on any business activity during the financial year under consideration but since the assessee company conducted business activities during the immediately preceding year to the financial year und....
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....f the assessee submitted that there are always some basic charges which are compulsorily payable to the electricity department on industrial connections, therefore, the claim of power and fuel charges is genuine and necessary to procure electricity connection installed in the factory premises of the assessee. The counsel also submitted that being a legal juristic entity, the assessee company is also bound to maintain its corporate office and electricity and power is also consumed therein, therefore, the claim of the assessee is genuine and allowable. 11. On above rival contentions, we are of the view that the claim of the assessee in regard to fuel and power cannot be said to be bogus or false because basic charges to procure industrial ....
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.... continue and carry on business activities during the year and near future, then despite the fact that there was no manufacturing and trading activity during the financial year under consideration, then also the basic expenses to maintain business and factory premises of the assessee and other legal expenses are also allowable and depreciation on the plant and machinery is allowable in the light of this very fact that depreciation on plant and machinery was allowed by the revenue during the preceding financial year to the year under consideration. 14. On the basis of foregoing discussion, we hold that the assessee has an intention to conduct business and manufacturing activity during the financial year under consideration, hence, basic e....