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2017 (4) TMI 521 - AT - Income TaxAllowing business expenses u/s 37 and claim of depreciation - suspension of manufacturing due to action under section 13(2) of SARFESI Act, 2002 by secured lenders against the assessee company - Held that:- In any case no evidence has been placed by the assessee on record to demonstrate that any attempt or efforts have been made by the assessee to do any business or to re-start its manufacturing unit at Mansa in the last 12 years since the said industrial unit in Mansa stood closed in the year 2005 till as of now in the year 2017. In our considered view, the expenses claimed by the assessee cannot be allowed as business expenses as they were not incurred wholly and exclusively for the purpose of business of the assessee as there is in-fact no business carried on by the assessee during previous year relevant to the impugned assessment year and there was also no possibility of carrying on business by the assessee in a near distant visible future keeping in view the severe and serious disability imposed by action by secured lenders under SARFESI Act and continued with the secured lenders , as mandate of Section 37(1) of 1961 Act is not fulfilled in the instant case. The secured assets of the assessee being under possession of the secured lenders during the previous year cannot be claimed by the assessee to have been put to business use both active as well passive user as both being ruled out , as it is not temporary lull in business but severe and serious disability disabling assessee to put the said asset for business user as mandated u/s 32(1) of 1961 Act to enable assessee to claim depreciation. The assessee is a single location unit entity having only one manufacturing unit in Mansa at Gujarat and Block of Assets constituted mainly assets of Mansa unit and hence it could also not be claimed by the assessee that the assets of Mansa unit formed part of Block of assets which block of asset also consists to have other assets of any other unit which is functional , as in the instant case it is a single unit / single location entity having only industrial unit in Mansa at Gujarat , and the assessee cannot claim that other assets except assets of Mansa unit were being put to use for business and hence consequently under the concept of Block of Asset, the assessee claim of depreciation of Mansa Unit should be allowed , as it is a single unit / single location company and the entire Block of asset revolves around and consists mainly of assets of Mansa unit which itselves are not put to use for business purposes during the entire previous year due to disability imposed under SARFESI Act, 2002 as discussed above. The depreciation claimed by the assessee is also not allowable as the entire block of asset which consists mainly of assets of Mansa unit at Gujarat was not put to use by the assessee, keeping in view peculiar factual matrix of the case and mandate of Section 32(1) of 1961 Act is not fulfilled in the instant case The expenses like auditor fees , ROC fee and other expenses etc. which are incurred by the assesseee company to carry out and meet legal and statutory compliances has to be allowed as the said expenses are incurred for meeting and complying with statutory compliances and obligations as imposed by law, for which we are remitting matter back to the file of the AO for identification of such expenses incurred for audit, ROC fees and other expenses incurred to carry out other statutory compliances , and to allow such expenses after verification. Thus, the appellate order of the ld. CIT(A) is set aside and the assessment order of the A.O. is confirmed subject to allowability of audit fee, ROC fee and other expenses incurred for undertaking and meeting statutory compliances , in accordance with our orders as detailed above.
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