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2013 (9) TMI 262 - AT - Income TaxPresumption of continuity of business, when external restriction has been put on carrying of business - Issue of enhancing the income of the assessee by Rs.1,07,98,248/- by disallowing the carry forward loss of Rs.1,07,98,248/- on account of trading in shares and securities claimed by the assessee as the assessee has not carried any business activity during the year under consideration - Assessee’s registration as share broker was cancelled by SEBI and there was no purchase and sale of shares by the assessee from the previous year - There being no business activity in shares and securities form the year 2001 on account of cancellation of registration as share broker, loss arising from mere valuation of the opening stock of shares would not lead to the conclusion that the assessee was carrying on any such activity – Held that:- Reliance has been placed in the decision in the case of KNP securities P. Ltd [2009 (5) TMI 840 - ITAT MUMBAI] - Not doing business activity was not on account of assessee’s will but on account of forced circumstances; therefore, it cannot be said that the assessee has closed/discontinued us business activity its own. The establishments of the assessee were intact and they were to be maintained. Staff members were kept and salaries were paid to them Loans taken from various banks and others for the purpose of business activity in past were outstanding during the years under consideration; therefore, any interest accrued was to be paid during the year under consideration or was payable. The assessee is having valid BSE card which could not be used for the reason that SEBI has passed an order barring the assessee not to do any business activity. Therefore, it cannot be said that the assessee could not use the BSE card its own which was ready to use – Assessee’s business has not come to an end. The meaning of discontinuation is explained in the Law Lexicon where “it implies a voluntary act and abandonment of possession followed by the actual possession of another, it implied that the person discontinuing has given up the lend and left it to the possessed by anyone choosing to come in - In the present case neither the business is discontinued on account of voluntary act of the assessee nor the same has put to stop its own. The business could not be done for the reason that SEBI has barred the assessee not to do any business activity till further order. The assessee was barred till further orders clearly mean that the assessee was not barred permanently - Expenses incurred by the assessee for the purpose of its business activity are allowable as the establishment was not scraped and the assessee was still hopeful to start its business activity - Reliance is again placed upon the judgment in the case of CIT vs Vellore Electric Corporation Ltd reported in [1998 (11) TMI 42 - MADRAS High Court] – Further, similar decision has been passed in the case of Sree Meenakshi Mill Ltd, in [1966 (9) TMI 34 - SUPREME Court] by Hon’ble Supreme Court – Decided in favor of Assessee. Loss on account of loss of shares - Held that:- the assessee has not produced any evidence either before the AO or before the Ld.CIT(A) as to the physical loss of the shares. Also, we find merit in the reasoning of the Ld.CIT(A) that if the shares are lost, the assessee could have obtained duplicate for the same. - Decided against the assessee. Prior period of expenses - mercantile system of accounting - Held that:- it is for the assessee to demonstrate that the liability has been incurred in the year under consideration. The Ld.AR’s argument that the prior period expenses to be allowed as set off against the prior period income, in our view, is not legally tenable. Also, as there is no material placed on record to show that there is any nexus that the expenses claimed are incurred for earning of the interest income in terms of section 57 of the Act - Decided against the assessee.
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