TMI Blog2014 (2) TMI 1068X X X X Extracts X X X X X X X X Extracts X X X X ..... on business activity but due to unavoidable circumstances beyond his control, the assessee could not conduct business activity during the financial year, then also the assessee company is entitled to allowance of fixed and necessary expenses to maintain basic infrastructure of the company and also depreciation on plant and machinery although the same could not be used for manufacturing activity during the year under consideration. The assessee has an intention to conduct business and manufacturing activity during the financial year under consideration – thus, basic expenses to maintain office and factory premises of the assessee are allowable and legal expenses pertaining to auditor’s fee etc. are also allowable - the plant and machinery was ready for use in manufacturing activity, then obviously the assessee is also eligible for allowance of depreciation on plant and machinery for the year under consideration - But there is a certain discrepancy, inconsistency in the amounts shown by the assessee in its profit and loss account and computation of depreciation - the amount of depreciation is to be determined at the end of Assessing Officer as per provisions of the Act as well as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowed the same and added to the income of the assessee for the year under consideration. The aggrieved assessee filed an appeal before the Commissioner of Income Tax(A) which was partly allowed pertaining to the preliminary expenses and auditor s remuneration totalling to Rs.13,450 but the disallowance of the balance amount of Rs.23,69,506 was upheld. Now, the empty handed assessee is again before this Tribunal in this second appeal with the grounds as mentioned hereinabove. Ground no. 1 2 of the assessee 4. Apropos both grounds, ld. counsel of the assessee submitted that as per Profit Loss account for the year ending on 31.3.2009 (Paper Book page no.13) and Schedule V attached to the final accounts of the assessee, the assessee had an opening and closing balance of raw material and packing material and assessee was maintaining entire infrastructure including plant, machinery, furniture and fixtures and assessee was intending to continue with the business of the company and there was no intention to shut down business. The counsel further pointed out Schedule VI of the final accounts and submitted that a huge amount of assessee was blocked with unsecured debtors and am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the orders of the authorities below and submitted that the Commissioner of Income Tax(A) was quite liberal in allowing the expenses of the auditors remuneration and preliminary expenses and remaining disallowance was rightly upheld by the Commissioner of Income Tax(A). 7. On careful consideration of above rival submissions, contentions and perusal of record placed before us, inter alia, legal propositions and citations relied by both the parties, at the outset, we observe that undisputedly the assessee company conducted business activity during the preceding year to the year under consideration ended on 31.3.2008. Further, from the decision of Jurisdictional High Court of Delhi in the case of Northern India Iron Steel Co. Ltd. (supra) wherein it has been held that where the assessee has the intention to take up manufacturing activity in the near future, an inference should be drawn that the assessee has an intention to conduct business activities. In the case of Commissioner of Income Tax vs Swarup Vegetable Products India Ltd. (supra), the Hon ble High Court of Allahabad held that the unit though actually not used was kept ready for use but despite all efforts to restore it, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctivity during the year under consideration. 10. Ld. DR submitted that when there was no manufacturing or business activity during the year, then the claim in regard to power and fuel amounting to Rs.1,40,267 is not acceptable and the same is away from truth. On this contention of the revenue, ld. counsel of the assessee submitted that there are always some basic charges which are compulsorily payable to the electricity department on industrial connections, therefore, the claim of power and fuel charges is genuine and necessary to procure electricity connection installed in the factory premises of the assessee. The counsel also submitted that being a legal juristic entity, the assessee company is also bound to maintain its corporate office and electricity and power is also consumed therein, therefore, the claim of the assessee is genuine and allowable. 11. On above rival contentions, we are of the view that the claim of the assessee in regard to fuel and power cannot be said to be bogus or false because basic charges to procure industrial connection are compulsorily payable and at the same time, electricity consumed and used in office premises is also a necessary payment. Accor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igible for allowance of depreciation on plant and machinery for the year under consideration. But there is a certain discrepancy, inconsistency in the amounts shown by the assessee in its profit and loss account and computation of depreciation. Therefore, the amount of depreciation is to be determined at the end of Assessing Officer as per provisions of the Act as well as Company s Act in the light of amount of depreciation which was allowed for the assessee during the preceding assessment year to the year under consideration and as per written down value brought forward in the beginning of the year. 15. In view of above, we hold that the claim of the assessee pertaining to expenses and depreciation is allowable and we set aside the orders of the authorities below with a direction to the Assessing Officer that the claim of the assessee pertaining to the expenses should be allowed and depreciation on plant and machinery should be allowed as per provisions of the Act as well as Company s Act 1956 and also in the light of allowance of depreciation to the assessee which was allowed during the immediately preceding year to the year under consideration i.e. AY 2008-09. Accordingly, gro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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