TaxTMI 
TaxTMI 
2014 (9) TMI 294
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....assessee company was engaged in the business of manufacture and sale of cold rolled steel. On account of huge losses, incurred in the past several years, the company was declared as sick unit and brought within the purview of BIFR. On 28.01.2003, though a show cause notice was issued for winding up of business, a compromise proposal was submitted, by one of the Directors, for revival of the company and a rehabilitation plan was submitted, which was ultimately approved with certain amendments. As per the scheme sanctioned under BIFR regulations the company was given a chance to revive itself, vide order dated 26.12.2007. We are concerned with assessment years 2004-05 & 2005-06 wherein the company could not carry on its main activity since it....
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....n the business. Similarly, with regard to depreciation, the case of the assessee was that due to labour problems company's activities temporarily came to a halt and BIFR issued notice for winding up of the company. But the fact remains that the company was interested in reviving its operations and, in that process kept the assets ready for use and thus depreciation has to be allowed on 'passive use' of assets. The AO rejected the contention on the ground that it is not a case of "forced idleness" of assets; Since the employees were already sent away and hence the intention was only to wind up the manufacturing activity and the company had no intention to revive its business. 6. Aggrieved, assessee preferred appeal before the CIT(A). It m....
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....s, the AO was directed to verify the claim and allow such expenditures which are referable to keeping the business alive, i.e. expenditure necessary to ensure its survival. With regard to professional charges also the learned CIT(A) observed that the expenditure was incurred for carrying out the restructuring activity of the company and since the liability crystallised in the years under consideration the same has to be allowed as deduction. He has also noticed that the assessee revived its business in the later years and achieved substantial turnover, which clearly shows that the intention was to revive the business and hence, in the years under consideration it has to be considered as a temporary lull in the activity in which event the ex....
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....ess that the company is eager to revive its activities. Impressed by the follow up the rehabilitation scheme was sanctioned. The learned counsel has filed additional paper book consisting of 11 pages to submit that soon after revival there was substantial manufacturing activity and sales have taken place from A.Y. 2007-08 and A.Y. 2009-10 and the overall facts would lend support to the contentions of the assessee that it was only a temporary lull in business and hence the claim made by the assessee deserves to be accepted. With regard to depreciation the learned counsel submitted that the assets were ready for use and merely because it could not be used in the years under consideration the depreciation once granted in the earlier years cann....