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ACIT, Circle 12 (1) , New Delhi Versus M/s Hi-tech Electrotherics &Hydropower Ltd.,

2016 (1) TMI 537 - ITAT DELHI

Disallowance of expenditure on account of not carrying any business activity - Held that:- We find from the details of the expenses filed in paper book and in the order of the Commissioner of Income Tax (Appeals) that those expenses were bare minimum required for the purpose of securing interest of the company for defending legal cases in connection with the liabilities, protection of assets and pursuing legal cases with the Government Departments. We find that the learned Commissioner of Income .....

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: Sh. Yatendra Singh, Sr.DR For the Respondent : Sh. V.K. Jain, CA ORDER Per: O P Kant: The present appeal by the Revenue is directed against the order of learned Commissioner of Income Tax(Appeals)-XV, New Delhi dated 18.01.2012 passed for the assessment year 2006-07. The Revenue raised the following grounds of appeal: i. Whether learned Commissioner of Income Tax(Appeals) was correct on facts and circumstances of the case and in law in deleting the disallowance of ₹ 24,64,325/- made by .....

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tiny through CASS and statutory notice under Section 143(3) of the Income-tax Act, 1961 (for short "the Act") was issued. The company was incorporated on 30.06.1995 and was engaged in the manufacturing of ferro alloys at its manufacturing unit located at Pallakkad, Kerala. The Assessing Officer observed that the assessee company did not carry out any business activity during the year. In response to the query raised by the Assessing Officer about reasons for claiming loss despite the f .....

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for that purpose minimum expenses on salary and wages, repair and maintenance, telephone, vehicle, rent etc., were incurred. The Assessing Officer after considering the submission of the assessee allowed the legal and professional expenses , however, disallowed the remaining expenses of ₹ 24,64,325/- on the ground that the assessee did not carry out any business activity. Aggrieved, the assessee filed an appeal before the Commissioner of Income Tax(Appeals). Before the learned Commissioner .....

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ted that the minimum salary to other staff and security expenses etc. were only incurred. The assessee also submitted detail of the litigation with IFCI Ltd. and ESIC. In support of its contention, the assessee also relied on the various case laws. After discussing the submissions of the assessee, the learned Commissioner of Income Tax (Appeals) sustained the addition of ₹ 3,55,871/- and ₹ 51,779/- paid to the employees towards retrenchment, compensation in ex-gratia on closure of th .....

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ear that the company was not able to carry out any manufacturing operations during the year. It is seen that due to ongoing litigation with the Kerala State Electricity Board (provider of electricity), IFCI Ltd. (lender) and Employees State Insurance Corporation, it was not in a position to carry out such manufacturing activity. The appellant company was in the process of defending various legal cases in connection with re-payment of liabilities of the appellant company, protection of its fixed .....

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ion of other expenses disallowed by the AD and as clarified by A.R vide letter dated 23.11.2011 and dated 17.11.2011, it is further found that the expenses disallowed by the Assessing Officer were those expenses which were necessary to carry on day to day activities and to defend the various legal proceedings against the appellant company. The expenses which have been disallowed are in the nature of salary and wages, repair & maintenance, telephone, vehicle running and maintenance, rent paid .....

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s. CIT 152 ITR 734. Thus disallowance to the extent of ₹ 407650/- is upheld and the addition to the extent of ₹ 20,56,675. I held that they were necessary for running and maintaining the day to day activities of the appellant's business and hence the disallowance is not correct and therefore it is deleted." 3. At the time of hearing before us the learned Sr. Departmental Representative relied on the order of the Assessing Officer and on the other hand, the learned Authorized .....

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