TMI Blog2010 (12) TMI 879X X X X Extracts X X X X X X X X Extracts X X X X ..... section 14A of the Act - Appeal is allowed for statistical purpose - ITA No. 6491/Mum/2004, ITA No. 6724/Mum/2004 - - - Dated:- 22-12-2010 - N.V. Vasudevan, T.R. Sood, JJ. R.S. Srivastav, Sr. DR, for the Appellant Aarti Vissanji for the Respondent ORDER N.V. Vasudevan: ITA No. 6724/M/04 is an appeal by the assessee, while ITA No.6491 is an appeal by the revenue. Both these appeals are directed against the order dated 4/6/2004 of CIT(A) XXVI, Mumbai relating to assessment year 2000-01. 2. Originally these appeals were heard and a common order dated 12/11/2008 was passed. The assessee filed Miscellaneous Application No.38 and 39/M/09 pointing out certain apparent mistake in the order of the Tribunal. The Tribunal by a common order dated 5/5/2009 recalled its order in respect of decision of Grojnd No.1 and 4 in the assessee appeal and Ground No.1 and 5 in the revenue's appeal. Ground No.1 in assessee's appeal and Ground No.1 in revenue's appeal are inter connected. So also Ground No.4 in assessee's appeal and Ground No.5 of revenue's appeal are interconnected. 3. Ground No.1 in Revenues' appeal and Ground No.1 in assessee's appeal reads as fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, rent rates, taxes, insurance etc. The assessee took another alternative stand that the factory premises was its business asset and any expenses incurred for protection and maintenance of business asset should be allowed as deduction. The details of expenses incurred at Kavesar Factory are as follows:- Sr. No. Particulars Amount 1 Stores and spares 2,022 2 Power, fuel and electricity 526,882 3 Travelling expenses 41,668 4 Entertainment 3,878 5. Rent, rates and taxes 654,424 6 Repairs 45,154 7 Postage and courier 11,729 8 Office expenses 38,947 9 Watch and ward 1,858,154 10 Insurance 80,744 11 Legal fees 45,757 12 Bank charges 6,099 Total Rs. 3,315,457 5. The Assessing Officer however, rejected the claim of the assessee. According to the AO it was apparent from the details submitted by the assessee, that separate figures for expenditure, assets, depreciation etc. in relatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed as no asset was used for business purposes." 7. Aggrieved by the relief granted by the CIT(A) revenue has preferred ground No.1 before the Tribunal. Aggrieved by the order of the CIT(A) sustaining part of the disallowance made by the Assessing Officer the assessee has raised Ground No.1 before the Tribunal. 8. We have heard the rival submissions. The ld. Counsel for the assessee reiterated the submissions as were made before the Assessing Officer and the CIT(A). For the proposition that expenses incurred to protect a business asset should be allowed as deduction, the ld. Counsel for the assessee relied on the decision of the Hon'ble Bombay High Court in the case of Hindustan Chemical Works Ltd. vs. CIT, 124 ITR 561(Bom). It was further submitted that as far as the depreciation on assets of the Kavesar unit is concerned the same forms part of the block of assets and, therefore, user of the assets is not relevant to allow depreciation. 9. On the other hand, ld. D.R relied on the order of the Assessing Officer and in particular the decision of the Hon'ble Supreme Court in the case of Chhabda and Sons (supra). 10. We have heard the rival submissions. The facts a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f exhibiting films carried on by the assessee and that therefore the sum of Rs.92,240 was not an allowable deduction in computing the assessee's business income for the assessment year 1955-56. From the mere circumstance that the result of the accounts of the different ventures was entered in the accounts maintained at the head office, no inference necessarily arose that the exhibition of films in different theatres constituted the same business. There is no such general principle that where an assessee carries on business ventures of the same character at different places it must be held as a matter of law that the ventures are parts of a single business: Whether different ventures carried on by the assessee form parts of the same business must depend on the facts and circumstances of each case, and it is for the assessee to establish that the different ventures constitute parts of the same business. If an assessee carries on several distinct and independent businesses, and one of such businesses is closed before the previous year, he cannot claim allowance under section 10 of the Income-tax Act, 1922. 12. On the other hand the learned counsel for the Assessee has placed relia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e composite; that the assessee was carrying on both the business in jewellery and in the exhibition of films till July 31, 1965, and that only thereafter was the activity of exhibition of films discontinued; and that the liability to pay interest had arisen in respect of the business carried on by the assessee till July 31, 1965. The Tribunal, accordingly, upheld the decision on the Appellate Assistant Commissioner to permit the deduction under section 36(1)(iii). The High Court came to the conclusion that, since the closing of the cinema business had not affected in the least the assessee's business in jewellery, there was no interconnection, interlacing or interdependence between the jewellery business and the cinema business. The High Court disallowed the deduction. On appeal to the Supreme Court, held allowing the appeal, that the Tribunal was right in concluding that such interest had to be treated as a deduction under section 36(1)(iii) of the Act. The loans had been obtained for the purposes of the assessee's business. The fact that the particular part of the business for which the loans had been obtained had been transferred or closed down did not alter the fact that the lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in the case of Hindustan Chemical Works Ltd. vs. CIT, 124 ITR 561(Bom) is justified. The expenses considered as allowable by the CIT(A) in this regard in our view are reasonable. The further claim of the Assessee that depreciation on assets of the Kavesar unit should be allowed because those assets have already entered the block of assets and therefore their use is no longer relevant is also justified. Therefore the claim for depreciation is also directed to be allowed. In the result, the ground of appeal of the revenue is dismissed while that of the Assessee is partly allowed. 14. Ground No.4 raised by the assessee and ground 5 raised by the revenue reads as follows: Ground No.IV -Assessee's Appeal:- "IV On the facts and circumstances of the case, the learned Commissioner of Income tax (Appeals) erred in: a) upholding action of the Assessing Officer of adhoc disallowance of expenses under section 14A. b) granting only partial relief and directing the Assessing Officer to disallow of 2.5% of Rs.2,65,17,385/-" Ground No.5- Revenue's Appeal:- "On the facts and in the circumstances of the case and in law, the CIT(A) erred in reducing the disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X
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