TMI Blog2020 (11) TMI 413X X X X Extracts X X X X X X X X Extracts X X X X ..... per Income Tax Act which has to be granted. We allow the appeal of the assessee. - ITA No.2512/Bang/2019 - - - Dated:- 9-11-2020 - Shri N.V. Vasudevan, Vice President And Shri Chandra Poojari, Accountant Member For the Assessee : Shri Tata Krishna, Advocate. For the Revenue : Shri Kannan Narayanan, JCIT(D.R) ORDER PER SHRI CHANDRA POOJARI, A.M. : This appeal filed by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-6, Bangalore dt.31.10.2019 for the Assessment Year 2016-17. 2. The assessee has raised the ground with regard to depreciation claimed at ₹ 20,40,391. 3. The facts of the case are that the assessee is a private limited company engaged in hotel business. The assessee filed Return of Income for the Assessment Year 2016-17 declaring loss of ₹ 53,38,264 and the return was selected for scrutiny under CASS and notice Under Section 143(2) and 142(1) of the Act were issued. In compliance, the A.R. of the assessee appeared form time to time and furnished the details. The Assessing Officer issued show cause notice dt.5.12.2018 and called for the documents. The Assessing Officer passed the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ramaswamy Iyer v. CIT [ 1969] 71 ITR 218 (Ker.) CIT v. Gopal Ch. Patnaik [ 1978] 111 ITR 86. (Orrisa) S.P.P.S. Systems (P.) Ltd. v. DCIT [2015] 154 ITD 465 (Hyderabad - Trib.) 4.1 The ld. AR submitted that the Assessing Officer is not justified in disallowing depreciation only for the reason that the assessee did not generate revenue from the hotel business. The assessee used the motor car for the purpose of business during the impugned financial year 2015-16. 4.2 The Appellant's total asset as on 31.03.2015 as per the audited financial statement is ₹ 29 crores. The total asset was increased to 31.78 crores on 31.03.2016. The said motor car was used to its F O operations and also to revive its hotel business. Hence it is submitted that the directors of the Appellant have used the car for to purpose of: F 0 Operations To visit properties for revival of the hotel business. To attend board and annual general meeting and to meet auditors, bankers company secretaries. Hence the lower authorities are not justified in disallowing the depreciation on the motor car under Section 32 of the IT Act, solely based on their perverse observation that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from letting out in the business of running a hotel in the 1st 2nd floors including the hotel is assessed under the head `income from business' and there is no dispute on this aspect. The dispute is only with regard to licence fee received referred to above which is in the ground 1st floors rented to various tenants on a daily, weekly, monthly and annual basis including the halls rented for exhibition. According to the Assessee, this income had to be assessed under the head `income from business'. 4.4.2 He submitted that from the above observations of this Hon'ble Tribunal, it is an undeniable fact that the Appellant company was engaged in the Hotel business in past years. However, on 31.01.2014 (i.e. FY 2013-14/AY 2014-15), the lessor took back the long-leased property (since 01.04.1983) in which the Appellant was engaged in the hotel business. This had led to suspension of Appellant's hotel business which ran for more than three decades. 4.4.3. According to ld AR, the Assessee was endeavoring to take other hotel properties on lease to resume its hotel business. During this process of the transitory disruption of the hotel business, the Appellant had t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. After hearing both sides, we find that the learned Commissioner of Income-tax (Appeals) has rightly allowed the claim of the assessee. The assessee was very much in business. We find no merits in this ground of the Revenue's appeal. 4.4.6. Further he relied on the following judgments -- i) Indian Railway Stations Development Corporation Ltd. v. PCIT [2019] 265 Taxman 11 (Delhi), it was held as under: The writ petitioner seeks the intervention of this Court to set aside an order of the Principal Commissioner of Income Tax [CIT] under Section 264 of the Income Tax Act, 1961. The petitioner is aggrieved by the assessment order made by the Assessing Officer (AO) for the assessment year (AY) 2013-2014, wherein the AO disallowed three items of expenditure claimed as deduction, i.e., depreciation, preliminary expenses, and employees' remuneration. . 14. The common thread of reasoning, which runs through these decisions cited by the assessee, is that in these cases there is no bright line that can be determinative as to when business commences. In case of the service sector, where the entity has involved itself in various kinds of steps, some of which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he parties. iv) In the case of Vikram Cotton Mills Ltd. (supra) the Hon'ble Supreme Court held that where an assessee leases its assets and the intention of the assessee is not to discontinue the business but to lease out the assets for a temporary period as a part of their exploitation, the lease rent derived from letting out the assets is assessable as business income and not as income from other sources. v) In the case of CIT v. National Mills Co. Ltd. [1958] 34 ITR 155 (Born.) the Hon'ble Supreme Court held that company under liquidation having leased its plant and machinery, it could not be said that business of company ceased in the face of clear findings of Tribunal and income from leasing could be set off against past losses. vi) In the case of Shri Lakshmi Silk Mills Ltd. (supra), the Hon'ble Supreme Court that where a manufacturer, being unable to use his plant gainfully, lets it out temporarily for making profits for that business, the plant so let out does not cease to be a commercial asset of the manufacturer and the income earned by letting it out is chargeable as business income under sec.1O of 1922 Act. vii) In the Case of Vellore Electric C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Payment of outstanding liabilities was not an activity which could ever produce such a result. It could not be said, therefore, that because liabilities of a closed business were outstanding, it had to be held that either the business was continuing or that an intention to resume business must be inferred. Hence, the company had ceased to carry on business, and the Tribunal's conclusion to the contrary was incorrect. These ratios of various decisions/judgments support the case of the assessee and the claims need to be allowed in favour of the assessee. We order accordingly. Further, on the other objection of the AO on the orders of MERC/APTEL about their closure order, we find the same are unsustainable in view of subsequent developments till 2016 on the decision of MERC and APTEL. Therefore, we dismiss the same too. Therefore, all these undisputed facts, in our view, support the existence of intention to do business of power distribution. Unlike in the case of Lahore Electric Supply Co. Ltd. (supra) where mere clearing of outstanding liabilities is only defense from 'Revenue' in support of intention for continuation of business activity, the case on hand and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed above, we have to see the transfer of the borrowed funds to a sister concern from the point of view of commercial expediency and not from the point of view whether the amount was advanced for earning profits. 4.4.9 The ld. AR also relied on the following decisions: i. Hero Cycles (P.) Ltd. v. CIT [2015] 379 ITR 347 (SC); ii. Sasson J.David 8 Co. P.Ltd. v. CIT (1979) 118 ITR 261 (SC); iii. CIT vs. Walchand and Co. (P.) Ltd., [ 1967] 65 ITR 381(SC); iv. CIT vs. Panipat Woollen 8v General Mills Co. Ltd., [ 1976] 103 ITR 66(SC) v. CIT v. British Paints India Ltd. [1991] 188 ITR 44 (SC) vi. Vipin Kumar Khanna v. CIT [2001] 251 ITR 7822 (Delhi) vii. CIT vs. Dalmia Cement P. Ltd., (2002) 254 ITR 377(Del) viii. PCIT v. Reebok India Company [2018] 409 ITR 587 (Delhi) ix. CIT v. Raghuvir Synthetics Ltd [2013] 354 ITR 222 (Gujarat) x. Q PCIT v. Chain House International (P.) Ltd. [2018] 98 taxmann.com 47 (Madhya Pradesh) xi. John Laing International Ltd. v. DCIT [2013] 145 ITD 145 (Delhi Trib.) xii. Km. Preeti Singh v. ITO [2019] 176 ITD 137 (Delhi - Trib.) 5. According to the ld. AR, the assessee is entitled depreciation since the assessee fulfi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the company was existing. Accordingly, the Hon'ble High Court of Himachal Pradesh held that since the company is in existence, the assessee was maintaining some staff, the assessee could claim depreciation Under Section 32(2) of the Act. In the present case also, the assessee company is in existence under the Companies Act and it has to fulfill various statutory compliances and it is not disputed that the assessee is earning income from F O business and other sources. The same was offered for tax. Unless and until the assessee is ceased to exist, the assessee is entitled for depreciation on assets which was included block of assets. For granting depreciation, it is not mandatory for assessee to have revenue from Hotel Business. In the present case, the Assessing Officer himself has allowed maintenance of Car expenditure however disallowed depreciation on the same which is not correct. In our opinion, the assessee is entitled for depreciation as per Income Tax Act which has to be granted. We allow the appeal of the assessee. 8. In the result, the appeal of the assessee is allowed. Pronounced in the open court on the date mentioned on the caption page. - - TaxTMI - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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