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2021 (12) TMI 1249 - AT - Income TaxDisallowance of Administrative Expenses - Closure of business activities - HELD THAT:- We find that in the earlier years, on similar facts and circumstances wherein there was no revenue from operations and assessee had incurred similar nature of expenditure debited to the profit & loss account, mostly under the heads, viz., salary and wages, employees benefit expenses and other expenses including statutory expenses and audit fees, were held to be allowable. One important fact noted by the Tribunal in the earlier years is that the fixed assets of the assessee company were subject matter of litigation u/s 18 of Land Acquisition Act and assessee was due to receive compensation of ₹ 460 crores which would be the income of the assessee in the year to receive. Assessee was maintaining this establishment and corporate set up for which it had incurred certain expenditure. Tribunal allowed the expenditure stating when the possibility of the revival of the business activities or operation of the assessee are not ruled out once for all, it cannot be said that the assessee company had closed down its operations permanently so as to disallow the business expenditure. The temporary lull in the business during the lean period of transaction cannot be mistaken to be the permanent close down of the business. The clear indication is that the assessee has to maintain its status as company till the end comes and it has to perform certain legal obligations by incurring certain expenditure and more particularly to pursue the litigation as a result of which it has to receive ₹ 460 crores approximately which shall form part of the income of the assessee in the year in which it will be received. In this year also, the aforesaid decision of the Tribunal will apply mutatis mutandis. Respectfully following the same, we direct AO to allow expenditure claimed in the profit & loss account. Ground No.1 raised by the assessee is allowed. Depreciation of Fixed Assets - It is sufficient that on similar facts, asset’s depreciation was allowed in the earlier years, therefore, this year no different treatment can be given simply because the business could not be carried out in this year. Accordingly, depreciation amount of ₹ 7,93,830/- is also allowed.
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