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Income Tax Officer Versus M/s Metallica Industries Ltd.,

2015 (7) TMI 354 - ITAT DELHI

Disallowance of expenses claimed u/s 43B, deposit of sales tax and legal expenses - CIT(A) allowed the claim - the business of the assessee was closed down on 28.02.1998, a finding of fact recorded by the ITAT in its own case for A.Y. 2003-04 - Held that:- It is an admitted fact that the assessee made the payment of the sales tax during the year under consideration and also pointed out to the AO that the assessee company was contesting sales tax cases before the Sales Tax Authorities. In the pre .....

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As regards to the disallowance out of legal and professional expenses, it is noticed that the AO disallowed the total claim of the assessee on the grounds that the assessee did not file any evidence and that the business operation were discontinued by the assessee. In the present case, the assessee furnished the evidences for making the payments to the various legal firms, the bills relating to those expenses were verified by the ld. CIT(A) and no adverse comment was given by the A .....

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ndings of the ld. CIT(A) on this issue. - Decided against revenue. - ITA No. 358/Del/2012 - Dated:- 25-3-2015 - Sh. G. C. Gupta And Sh. N. K. Saini JJ. For the Appellant : Sh. Ashwani Taneja, Adv. For the Respondent : Sh. P. Dam Kanunjha, Sr. DR ORDER Per N. K. Saini, AM: This is an appeal by the department against the order dated 31.10.2011 of ld. CIT(A)-IX, New Delhi. 2. Following grounds have been raised in this appeal: 1. The order of the Learned CIT(A) is erroneous & contrary of facts & .....

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principal that business expenses can be allowed only when business is being carried out by the assessee during the year under consideration. If the business is wound up, no expenses relatable to business carried out earlier can be allowed against income from other heads the year under consideration. 3. The appellant craves leave to add, to alter, or amend any ground of the appeal raised above at the time of hearing. 3. Facts of the case in brief are that the assessee filed the return of income o .....

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e at the taxable income for income tax purposes, it had reduced ₹ 12,04,401/- on account of sales tax u/s 43B of the Income Tax Act, 1961 (hereinafter referred to as the Act). The AO observed that the income for the previous year was computed by the assessee at a loss of ₹ 22,82,190/- but no reference/confirmation/evidence/justification whatsoever had been filed for reducing the amount of ₹ 12,04,401/- out of the book profits. The AO disallowed the said amount of ₹ 12,04, .....

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ts and liabilities were not brought to Nil. It was further submitted that the assessee explained to the AO that the company was contesting sales tax cases before the Sales Tax Authorities and had also not paid tax in time which was disallowed u/s 43B of the Act at the time of assessment of the respective years. It was stated that ultimately the sales tax was paid in the Financial Years 2005-06 and 2006-07, therefore, it was claimed as allowable expenses. It was explained that the assessee had pa .....

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payable u/s 43B of the Act was wrongly disallowed by the AO without appreciating the complete facts of the case. It was also stated that the sales tax liability paid during the year was not an expense other than the business expense as it was paid only on account of business done by the assessee. It was further stated that in the profit and loss account, the assessee had shown compensation and other income received by it during the year, which were from the same business against which expenses .....

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submitted that the expenses were incurred for attending the sales tax matters in Mumbai and for filing charges of annual return with ROC. The assessee also furnished copy of Form No. 16A to justify the payments made. The reliance was placed on the following case laws: S. R. Koshti 276 ITR 165 (Guj.) Snehlata (2004) 192 CTR 50 (J&K High Court) 6. The ld. CIT(A) also asked the remand report from the AO who stated that the business of the assessee had been closed down since 28.02.1998 and the .....

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were purely business related items, could not be allowed as business itself was closed down and that the expenditure necessary for maintaining the corporate structure does not mean expenditure incurred for carrying out a business. 7. The ld. CIT(A) after considering the submissions of the assessee and the remand report of the AO observed that it was not a case of the AO that the amount of sales tax was not paid by the assessee during the year under consideration and it cannot be said that the s .....

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had been filed by the assessee during the course of appellate proceedings which had also been examined by the AO to whom the same were forwarded. The ld. CIT(A) allowed the claim of the assess for payment of ₹ 12,04,401/- u/s 43B of the Act. He also deleted the disallowance amounting to ₹ 12,71,627/- made by the AO by observing that the sales tax liability was paid by the assessee during the year under consideration. As regards to the disallowance out of legal and professional expens .....

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O to allow a sum of ₹ 1,12,500/- out of the disallowance of ₹ 3,47,570/- and remaining disallowance was sustained by observing that no comments were offered on the same by the assessee. 8. Now the department is in appeal. The ld. Senior DR strongly supported the order of the AO and further submitted that since the business of the assessee was closed down. Therefore, the AO rightly disallowed the expenses and the sales tax claimed by the assessee and that the ld. CIT(A) was not justif .....

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ered the submissions of both the parties and carefully gone through the material available on the record. In the present case it is an admitted fact that the assessee made the payment of the sales tax during the year under consideration and also pointed out to the AO that the assessee company was contesting sales tax cases before the Sales Tax Authorities. In the present case nothing was brought on record to substantiate that the assessee did not make the payment of the sales tax liabilities whi .....

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