Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2011 (6) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2011 (6) TMI 681 - AT - Income TaxBusiness income or capital gain - Temporary ceasement of business - Intention of assessee - Held that:- the refinery was to be managed and operated by the assessee and the assessee had the final say on the raw edible oil products that were to be used. Refined edible oils were to be marketed under the brand name of the assessee only. In other words, the assessee was intimately involved in the business though not directly doing it. Clause 4 of the above agreement also mentions that personnel employed by the assessee would automatically get deputed to the licencee. It is thus in our opinion exploitation of a commercial asset by the assessee as the licencee was not given a permanent right of use. It is clear that the validity of the licence was only up to December 31, 2009 and if any renewal was to be there, it had to be done on mutually acceptable terms - revival would be possible only if support was forthcoming from the lenders during the implementation of the rehabilitation plan. Nevertheless, it is also mentioned by the directors at paragraph 2 of their report that they were confident of succeeding in the appeal before the appellate authority for industrial and financial reconstruction, which would facilitate revival of assessee-company's business operations. The assessee had filed an appeal before the appellate authority for industrial and financial reconstruction, challenging the rejection of its reference before BIFR, on January 17, 2006. Hence, contemplation of the assessee was always to revive its business and not to let its premises out permanently. The accounts were also prepared by them on a going concern basis. The assessee also had current assets which included inventory of Rs. 174.57 lakhs as seen from schedule 7 of its audited accounts statement for the relevant previous year. Such inventory included raw materials of Rs. 53.75 lakhs, work in process of Rs. 26.34 lakhs, finished stock Rs. 64.35 lakhs. No doubt, these were held at the same value from the previous financial year ended on March 31, 2006. But, had the intention of the company been to discontinue its business, then it would not have held on to such inventory, without disposing of them. The intention, as seen in the holding of inventory, also was to resume its operation as soon as possible - asses-see had an intention to resume and it was not a case where business had never started. The assessee's brand names were used by the licencee, its personnel were used by the licencee and it had control over the quality of raw materials also. We cannot say that there was a stoppage of the bussiness as a whole, but the fact of the matter was that the business was being continued by the assessee in a different manner. Even if we presume that there was a temporary stoppage, there was a clear intention to resume - Following decision of Commissioner of Income-Tax, Lucknow Versus Vikram Cotton Mills Limited [1987 (12) TMI 1 - SUPREME Court] and Commissioner of Income-Tax Versus Podar Cement Pvt. Limited And Others [1997 (5) TMI 2 - SUPREME Court] - Decided against Revenue.
|