TMI Blog2015 (7) TMI 354X X X X Extracts X X X X X X X X Extracts X X X X ..... nd were disallowed in the earlier years u/s 43B of the Act and since the assessee furnished the evidences for making the payments during the year under consideration which were duly verified by the ld. CIT(A) and no adverse comments were given by the AO in the remand proceedings, therefore, the disallowances were rightly deleted by the ld. CIT(A). 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , a finding of fact recorded by the ITAT in its own case for A.Y. 2003-04. 2.1 The ld. CIT(A) erred in not appreciating the legal 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 on 31.10.2007 declaring a loss of ₹ 22,82,190/-. Later on, the case was selected for scrutiny. The AO dur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 paid total sales tax liability of ₹ 24,86,078/- which included sales tax liability of ₹ 12,14,451/- but wrongly mentioned the figure of ₹ 12,04,401/- in the computation of income, thus, the liability claimed was lesser by ₹ 10,050/-. It was specified that current liabilities and provisions including other creditors amounting to ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 said finding was recorded in the order of the ITAT in the case of the assessee itself for the assessment year 2003-04. The AO also mentioned that the income earned in absence of any business activity was taxable under the head income from other sources . It was further submitted that the items of expenditure which were allowable while carrying out business did not qualify for deduction while earning income from other sources . The AO opined that the claim u/s 43B of the Act, sales tax etc. which were purely business related items, could not be allowed as business itself was closed down and that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accept that the entire payments made to the professionals were related to the business of the assessee i.e. for the purpose of sales tax litigation and to maintain corporate status. He also observed that it cannot be said that the assessee did not incur any expenditure under this head of expense and pointed out that the assessee produced bills for ₹ 1,12,500/-. He, therefore, directed the AO 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 ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12,04,401/- and ₹ 12,71,627/- were rightly deleted by the ld. CIT(A). As regards to the disallowance out of legal and professional expenses, it is noticed that the AO disallowed the total claim of the assessee amounting to ₹ 3,47,570/- 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 of ₹ 1,12,500/- 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 AO in his remand report except that the business of the assessee discontinued. In our opinion the ld. CIT(A) rightly directed the AO t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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