TaxTMI 
TaxTMI 
TaxTMI 
2019 (7) TMI 988
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....gainst its other income in respect of Assessment Years 1999-00, 2000-01 and 2002-03?" 3.Since the facts are identical in all the three appeals, it would suffice to refer to the facts for the assessment year 1999-2000, which is subject matter of Tax Case (Appeal) No.31 of 2009. 4.The assessee, who was engaged in the manufacture and sale of aluminium conductors, filed its return of income on 30.12.1999 declaring a total income of Rs. 28,83,800/-. The return was processed under Section 143(1), on 29.02.2000. Notice under Section 148 of the Act was issued, on 18.02.2004. In response to the same, the assessee stated that the return filed, on 30.12.1999, may be treated as a return in response to notice under Section 148 of the Act. Subsequently, the case was discussed with the Assessing Officer wherein, the assessee took a stand that during the assessment year under consideration, the assessee was trying its level best to get orders from the Tamil Nadu Electricity Board and others. Due to low margin offered by the Board, they could not get relevant orders. However, the assessee company's assets such as machinery, vehicles, trucks, furniture and fittings, factory sheds were mainta....
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....gal and other formalities of maintaining the assessee company. The income from the lease rentals are taxed under the head "house property" and for the income taxed under the house property, the expenditure incurred on fulfilling the legal and other formalities of the assessee company is not allowable. Therefore, the argument of the assessee that the expenses had to be allowed to continue the business of the assessee company is not sustainable and took note of the Director's report, wherein it has been clearly mentioned that the assessee company is not engaged in the production of conductors. 8.Further, with regard to the plea of depreciation, it was held that depreciation is allowable only if the assets are used for the purpose of business and since the asset has not been put to use, depreciation claim is not allowable. Further, with regard to the order passed by the Tribunal for the assessment year 2001-02, it was observed that the said matter was decided in favour of the assessee on a technical ground. 9.The assessee filed appeal before the Commissioner of Income Tax (Appeals)-XII, Chennai (for brevity, "the CIT(A)"), who by order dated 21.03.2006, affirmed the order passed....
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....tems A to E. 14.2. Referring to sub-Clause (ii) in Section 56(2), it is submitted that income from machinery, plant or furniture belonging to the assessee and let on hire, if the income is not chargeable to income-tax under the head "Profits and gains of business or profession". 14.3. Thus, it is submitted that the assessee was not entitled to seek a set off of what they have incurred as business expenditure especially when, there is no business activity by the assessee. 15.Further, the learned counsel referred to Section 24 of the Act which refers to "income from house property" and in sub-Clause (a) there of, a sum of thirty per cent of the annual value is permissible as deduction and in addition there to, there can be no other deduction. 16.Further, it is submitted that even in the assessment year 2003-04, there was no manufacturing activity and the board of the assessee company passed a resolution and entered into a memorandum of understanding with their sister concern, switched over to marketing of products manufactured by third parties. Thus, it is the submission that without business activity, neither business expenditure, nor business loss can be claimed. 17.Further, i....
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....n was made by the Tribunal to hold that the Commissioner of Income-tax was not justified in invoking the power under Section 263 of the Act. When the matter was carried on appeal by the Revenue to this Court, the Court proceeded on the basis that there were two lines of activities and they are interconnected, interdependence and unity to show the common management. The Division Bench affirmed the order passed by the Tribunal that there was a temporary stoppage of business. Subsequently, the assessee continued the business in distributorship. Unfortunately, the factual position being, even in the assessment year 2003-04, no business activity was commenced, viz., the business activity of the assessee, that is, manufacture of aluminium conductors. The business activity started by the assessee in the assessment year 2003-04 was entirely a new line of activity and the Board of Directors passed a resolution, memorandum of understanding was entered into and it is not a manufacturing activity, but a trading or a distribution activity. Therefore, we are of the considered view that the decision rendered by the Tribunal for the assessment year 2001-02 cannot render any assistance to the case....
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....e of producing a profit and payment of outstanding liabilities is not an activity which can ever produce such a result. To similar effect is the decision in Indraprastha Steel Industries Ltd. v. ITAT (1973) 88 ITR 138 (Delhi). There also, during the accounting period relevant to the assessment year 1967-68, the assessee did not make any purchases, nor did it spend any amount on purchase of stores and spares consumed and had no stock in possession, but it was realising its dues and earned interest on the outstandings from the purchasers of the machinery. Affirming the order of the Tribunal, the court held that merely because the assessee, during the relevant year, engaged itself in realising its assets and had earned interest, it cannot be said that it had engaged in any business. The principle laid down in the aforesaid that it had engaged in any business. The principle laid down in the aforesaid decisions would squarely apply to the facts of this case when it is seen that, during the accounting years relevant to the assessment years in question, the assessee had not made any advance at all or entered into hire-purchase transactions, but had merely been realising the outstandings. ....
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....essee. 28.With regard to the decision in CIT vs. Vikram Cotton Mills Ltd., reported in (1988) 169 ITR 0597 (SC), Ms.Sree Lakshmi Valli relied on the same to demonstrate the intention of the assessee to start the business and not to close down it. In our considered view, the stand taken by the assessee in 2004 while responding to the notice under Section 148 appears to be a clear afterthought and the explanation given by the assessee can hardly qualify to state that there was an intention on the part of the assessee to commence business. This is manifested from the fact that even in the assessment year 2003-04, manufacturing activity did not commence and the assessee switched over to a new line of business, into trading. 29.In the decision in the case of L.VE.Vairavan Chettiar (supra), the Court found that there was nothing to show that the business had been abandoned and the assessee was continued to incur expenditure and it would come up and the business would be successful. In the said factual background, the Court held that the resultant loss being business loss is deductible. The three fact finding authorities have held that the entire business activity have come to a groundi....