TaxTMI 
TaxTMI 
2015 (7) TMI 354
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....aimed u/s 43, deposit of sales tax of Rs. 12,71,627/- and legal expenses of Rs. 1,12,500/- as allowable business expenses, despite the fact that the business of the assessee was closed down on 28.02.1998, a finding of fact recorded by the ITAT in its own case for A.Y. 2003-04. 2.1 The ld. CIT(A) erred in not appreciating the legal principal that business expenses can be allowed only when business is being carried out by the assessee during the year under consideration. If the business is wound up, no expenses relatable to business carried out earlier can be allowed against income from other heads the year under consideration. 3. The appellant craves leave to add, to alter, or amend any ground of the appeal raised above at the time of hear....
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....d to the sales tax liabilities and that the assets and liabilities were not brought to Nil. It was further submitted that the assessee explained to the AO that the company was contesting sales tax cases before the Sales Tax Authorities and had also not paid tax in time which was disallowed u/s 43B of the Act at the time of assessment of the respective years. It was stated that ultimately the sales tax was paid in the Financial Years 2005-06 and 2006-07, therefore, it was claimed as allowable expenses. It was explained that the assessee had paid total sales tax liability of Rs. 24,86,078/- which included sales tax liability of Rs. 12,14,451/- but wrongly mentioned the figure of Rs. 12,04,401/- in the computation of income, thus, the liabilit....
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....e was placed on the following case laws: S. R. Koshti 276 ITR 165 (Guj.) Snehlata (2004) 192 CTR 50 (J&K High Court) 6. The ld. CIT(A) also asked the remand report from the AO who stated that the business of the assessee had been closed down since 28.02.1998 and the said finding was recorded in the order of the ITAT in the case of the assessee itself for the assessment year 2003-04. The AO also mentioned that the income earned in absence of any business activity was taxable under the head 'income from other sources'. It was further submitted that the items of expenditure which were allowable while carrying out business did not qualify for deduction while earning 'income from other sources'. The AO opined that the claim u/s 43B of the Act, ....
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....sional expenses, the ld. CIT(A) observed that in the absence of complete evidences on record, it was difficult to accept that the entire payments made to the professionals were related to the business of the assessee i.e. for the purpose of sales tax litigation and to maintain corporate status. He also observed that it cannot be said that the assessee did not incur any expenditure under this head of expense and pointed out that the assessee produced bills for Rs. 1,12,500/-. He, therefore, directed the AO to allow a sum of Rs. 1,12,500/- out of the disallowance of Rs. 3,47,570/- and remaining disallowance was sustained by observing that no comments were offered on the same by the assessee. 8. Now the department is in appeal. The ld. Senior....