TMI Blog2011 (6) TMI 819X X X X Extracts X X X X X X X X Extracts X X X X ..... n connection with setting up of a petrochemical plant in West Bengal . The return of income was filed declaring total income of ₹ 13,02,55,470/ -. However, the assessment was completed at an income of ₹ 15,35,19,800/ - vide order dated 21.2.2006 passed under section 143(3) of the Income Tax Act, 1961 (the Act ) . On appeal , the learned Commissioner of Income Tax (A) partly allowed the appeal . 3. Being aggrieved by the order of the learned Commissioner of Income Tax (A), the assessee is in appeal before us. 4. Ground No.1 is against the sustenance of disallowance of expenses of Dabhol Power Project of ₹ 1,52,87,952/ - . 5. The brief facts of the issue are that during the course of assessment proceedings, the AO interalia observed that the contract with DPC was terminated with effect from 17.6.2001 for the default in payment by DPC. The Petrochemical Project at Haldia had been completed in past . During the year the project of f ice was actively pursuing i ts claim made against the DPC at the same time exploring the possibility of reviving the project. Also during the year the project of f ice was engaged in regulatory compliance under Income Tax Act, Sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in that year and also al lowed to be carried forward as business loss to the next year and in support , the assessee also placed reliance on various decisions. The AO after considering the assessee s submissions observed that i t is a fact that the PetroChemical Project in West Bengal has been completed and the contract with DPC has been terminated effective 17 June 2001. Also there is no business income in both the project during the year . It is only other income shown by the assessee in both the projects. Therefore, any expenditure is not allowable against these unearned income shown by the assessee under the head other income in both the project and the case laws relied upon by the assessee-company are enti rely different than the facts of the assessee s case. The AO after relying on certain decisions appearing at page 5 of the assessment order held that the expendi ture claimed by the assessee against the income from both the projects shown by the assessee is not allowable as there was no business activity carried on by the assessee during the year. Besides the above, the AO further observed that in the absence of any details furnished by the assessee, deduction under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the agreement, the assessee started the winding up proceedings and started demobilizing man, material and equipment from Dabhol site and started sending them to the places outside India where they could be used. Besides demobi l izing i ts equipment, material and manpower , assessee was also engaged in pursuing i ts dispute with DPC for the amounts receivable f rom DPC towards the cont ract. The learned Commissioner of Income Tax (A) af ter relying the ratio of certain decisions appearing at pages 8 to 10 of his order has held that the assessee had no business during Financial Year 2002-03 and was not entitled to deduct ion of any business expenditure. Claim of expenses of ₹ 1,52,87,952/- made in the return of income is therefore not in order . The AO has rightly disallowed. Income of the Dabhol Project shall be taken at ₹ 59,90,915/ - as shown in the books. The learned Commissioner of Income Tax (A) on the issue of disallowance of payment of ₹ 2,11,581/ - to the Sales Tax Authorities after examining the nature of payment held that in the event of business expenditure being allowable to the assessee, the disallowance to the extent of two payments of ₹ 1, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 Karsondas Ranchhoddass Vs. CIT (1972) (83 ITR 1)(Bom) 2 L.VE Vai ravan Chettiar V.CIT (1969) (72 ITR 114) (Mad) 3 CIT V/s Bharat Nidhi Ltd. (1966) 60 ITR 520(Punj .) 4 M/s King Prawns Limited V. ITO 2011-TIOL-100-ITATMum 5 ITO V/s Mokul Finance (P) Ltd. (2007) 110 TTJ (Del ) 445 6 ITO V/s Mrs.Vanishree Karunakaran (2003) 86 ITD 273 (Chennai ) 7 Commentary by Chaturvedi Pithisaria (Fifth edition, Vol-1 page (1369-70) In the light of the above, he submits since the assessee has filed complete details of expenses, break up of which is appearing at pages No.13,18 and 35 of the assessee s paper book, the learned Commissioner of Income Tax (A) was not justified in sustaining the disallowance of expenses of ₹ 1,52,87,952/ - made by the AO and therefore the disallowance made by the AO be deleted. 8. On the other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company for the whole year . 13. In M/s King Prawns Limited, (supra) i t has been held that it is clear from the annual account of the assessee and the return filed by it that the assessee had revived i ts business, the Revenue cannot overlook the evidences and hold that the business can never be revived and accordingly allowed the claim of the assessee. 14. In Mokul Finance (P) Ltd. (supra) i t has been held that the assessee company having not closed i ts business, expenditure incurred during the period of dormancy of business in order to keep the company afloat is allowable business expenditure. 15. In Mrs.Vanishree Karunakaran (supra) i t has been held that the assessee having incur red expenditure towards interest on borrowals taken for business i t cannot be said that there was no business loss simply because there was nothing on credit side of the P L account owing to temporary lul l in the business; cur rent year s loss from business can be set of f against the cur rent year s profit from the profession carried on by the assessee in view of section 70 of the Act. 16. Applying the ratio of the above decisions to the facts of the present case and in absence of an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DIT Vs. M/s NGC Network Asia LLC (2009) (313 ITR 187)(Bom) 3 DIT V.Jacabs Civil Incorporated (2010) (235 ITR 123)(Del ) 4 Motorola Inc.V.Dy.CIT (2005)95 ITD269(Del ) (SB) 5 DDIT V.TUV Management Services GMBH (2011) 43 SOT 23(Mum) (URO) He also placed on record the copy of the above decisions. 22. On the other hand, the learned D.R. supports the order of the AO and the learned Commissioner of Income Tax (A). 23. We have carefully considered the submissions of the rival parties and perused the material available on record. We f ind that there is no dispute that the assessee company is a non-resident and all the payments are made to it are subject to deduction of tax at source under section 195 of the Act. 24. In M/s NGC Network Asia LLC, (supra) i t has been held that when the duty is cast on the payer to deduct tax at source, on failure of the payer to do so, no interest can be imposed on the payee assessee under section 234B of the Act. Respectfully following the decision of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .R. supports the order of the AO and the learned Commissioner of Income Tax (A). 28. Having careful ly heard the submissions of the rival parties and perusing the material avai lable on record we f ind meri t in the plea of the learned counsel for the assessee that the Tribunal in the assessee s own case (supra) has admi t ted the simi lar issue and restored the matter to the f i le of the AO. The relevant paragraphs 4 and 5 are reproduced below as under : 4. The learned counsel for the assessee stated before us that subsequent to the decision of the CIT(A) , there has been a development, which is requi red to be taken into consideration for disposal of the appeal . It has been pointed out that there was a Set tlement Agreement between the various parties and subsequent to the set tlement, the Government of India has executed a Deed of Release dated 12th July, 2005, by vi rtue of which the Government of India has agreed that tax l iabi l i ty on the set tlement payments [as def ined in settlement agreement] the transactions contemplated and claim being compromised thereby would in the event i t exceeds 3 mi l l ion US $ be paid by Maharashtra Power Development Corporation L ..... X X X X Extracts X X X X X X X X Extracts X X X X
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