TaxTMI 
TaxTMI 
2020 (11) TMI 413
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....and called for the documents. The Assessing Officer passed the assessment order Under Section 143(3) by disallowing depreciation as per Companies Act on Motor Car of Rs. 44,70,008 and legal and consultancy fees, professional fees, penalty and fines Under Section 37 of the Act aggregating to Rs. 7,89,522. On appeal, the CIT (Appeals) confirmed the order of the Assessing Officer however he directed the Assessing Officer to disallow the depreciation as per the Income Tax Act, 1961 ('the Act') and not as per the Companies Act. Against this order, the assessee is in appeal before us. 4. The learned Authorised Representative submitted that lower authorities disallowed the depreciation only on the basis that the assessee has not engaged in the hotel business. It is submitted that the assessee incurred loss from F & O operations which is reflected in the assessee's financial statements under the head "Profits and Gains of Business or Profession" and allowed such loss set off against capital gains and other income. The learned Authorised Representative submitted that in the assessment year under consideration the assessee engaged in Futures & Options (F&O). According to the lea....
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....n their perverse observation that the appellant was not engaged in business. 4.3 Without prejudice to the above, the Lower Authorities have failed to appreciate that the appellant had carried on the business of operation of hotel in the past by taking the hotel property on lease and as the lessor took back the property, the appellant was endeavoring to take other hotel properties on lease, indicating continuance of hotel business. 4.4.1 The ld. AR relied on the order of Tribunal in Assessee's own case in ITA Nos.543 to 546/Bang/2013 for AYs' 2005-06, 2007-08, 2008-09 8s 2009-101 has made following observations: " The facts giving rise to the aforesaid issue in all these appeals are identical. The assessee is a company engaged in the business of running of hotel besides a consignment business of Suitcase and Travel Bag in the name & style of Samsonite. As already stated, it also receives income in the form of licence fees from letting of commercial space to various tenants on a daily, weekly, monthly and annual basis including the halls rented for exhibition. The assessee has constructed a composite structure consisting of a hotel and building complex on a land, which th....
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....Appellant had to manage its assets (The total assets of the Appellant as on as on 31.03.2016 were Rs. 31.78 crores). The Appellant was engaged in the F&O operations. It is pertinent to note that no person of prudence is expected to keep the funds idle in the course of its business. 4.4.4 He relied on the judgment in the case of CIT Vs. Kriti Resorts (P.) Ltd. [2011] 243 CTR 341 , (Himachal Pradesh), it was held as under: " The AO held that since the assessee had discontinued its Business since 1995 the income was not income from business but income from other sources and therefore the expenses claimed and depreciation brought forward could not be set off against the said income. 12. The first question which arises is whether the assessee can still be said to be in business or not. No doubt the hotel of the assessee was washed away and in that respect it can be said that it has not conducted any hotel business thereafter. However, the company does not cease to exist. The company is a juristic entity and incorporated under the Indian Companies Act. It will have to fulfil its obligations imposed upon it by the Companies Act till it is wound up. Therefore, some staff will have t....
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....setting up the main substantial commercial venture, the linkage between these preliminary steps and nature of the ultimate activity may be a relevant factor to be taken into account. Therefore, Carefour dealt with this trading related aspect and stated that even certain kinds of preliminary steps, such as engaging in negotiation or employment of personnel, could be relevant even though actual activity might not be involved. 15. Keeping this principle in mind, this Court is of the opinion that the petitioner's activity, which it claims to be preliminary steps towards the fulfillment of the purpose, which is embodied in the MoU and extracts of which have been reproduced above, clearly indicates that it had set up its business and that these steps were for the ultimate fulfillment of its purposes, which was the preparation of development plans leading to the projects" ii) PCIT v. Babul Products (P.) Ltd. [2018] 257 Taxman 100 (Gujarat), it was held as under: " 2. We have heard Mrs Mauna Bhatt, learned advocate appearing on behalf of the revenue. So far as proposed question no.(a) is concerned, learned Assessing Officer disallowed the depreciation claimed by the assessee of R....
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....e Madras High Court held that there was no discontinuation of assessee's business while it was challenging the acquisition of its undertaking by State Government and the matter was pending in the court; all the expenses incurred by assessee in running the establishment during that period are allowable as deduction. viii) In the case of L. Ve. Vairavan Chettiar v. CIT [1969] 72 ITR 114, the Hon'ble Madras High Court held that if a person carries on two or more distinct businesses, the profits or losses of all of them ought to be added together and the aggregate sum would represent his profits or gains in the business. ix) In the case of Lahore Electric Supply Co. Ltd. (supra), the Hon'ble Supreme Court observed as under (HELD PORTION). "None of the above grounds led to the conclusion that the company intended to canyon business. The mere fact that the company had not gone into liquidation would not establish that it had the intention to do business. There was further no question of the company's going into liquidation in the accounting years, for, during that time it had not received from the Government the entire amount due to it as compensation for the said a....
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....e. Further, we find the judgment in the case of Vellore Electric Corpn. Ltd. (supra) is very close to the facts of the present one under consideration so long as the takeover decision of the Court is concerned. But the basis of actions of the present assessee keeps the assessee on a different pedestal. Therefore, the business of the assessee cannot be held to be a discontinued one. All the administrative expenses have to be allowable as business expenditure. Therefore, we find it difficult to conclude that the assessee does not have any intention to continue the business of power distribution. Accordingly, the Ground No.1 raised by the assessee is allowed. Whether the Expenses debited to Profit and Loss Account constitute business expenditure eligible for claim of deduction u/s.37 of the Act. 4.4.7 He submitted that the revenue has no role to decide when a businessman should continue or discontinue his business. When the Appellant has a clear intention to continue its hotel operation, the Lower Authorities cannot consider the same as terminated. During the interim period of search of new hotel properties, the Appellant can be engaged in the F&O operations. The Lower Authoritie....
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....impugned asset on which depreciation claimed was included in the block of assets. Further it was submitted that the Assessing Officer having granted the maintenance expenditure of Car, it is not proper to disallow the depreciation on the same Car. He relied on the following judgements : i) CIT Vs. Malayalam Plantations Ltd. (1964) 53 ITR 140 (SC) ii) CIT Vs. Delhi Safe Deposit Co. Ltd. (1982) 133 ITR 756 (SC) iii) CIT Vs. Lawrence D'Souza (2011) 203 Taxman 200 (Kar) iv) Hirsh Bracelet India (P) Ltd. Vs. ACIT (2019) 178 ITD 601 (Bang - Trib) v) Sai Fragrance & Flavours (P) Ltd. Vs. ACIT (2018) 169 ITD 235 (Mum-Trib). 5.1 Further it was submitted that even the assessee has discontinued hotel business it is necessary to use the Car by the Director of the assessee company and there will be wear and tear which is in the nature of depreciation for which the assessee is entitled for depreciation. 6. On the other hand, the learned Departmental Representative submitted that there was no revenue from the hotel business during the year under consideration and there is no question of allowing any business expenditure and condition laid down in Section 32 are not fulfilled and the a....