TMI Blog2010 (11) TMI 1072X X X X Extracts X X X X X X X X Extracts X X X X ..... ources , the assessee has claimed an expenditure of ₹ 12,55,869 which is in the nature of expenditure which can only be allowed deduction for business income. It was in this backdrop that the Assessing Officer disallowed the expenses of ₹ 12,55,869. Aggrieved, assessee carried the matter in appeal before the CIT(A). It was submitted by the assessee that the assessee was an investment company and was assessed as such in past. Since the assessee was in the business of investment, the expenditure relating to its business was to be allowed as deduction in computation of business income. The main business of the assessee was claimed to be investment. It was also contended that to carry on business it had to have its own infrastructure, and, for this purposes, the assessee had incurred expenditure. It was also submitted that most of the expenses considered above ( i.e. salary, repairs and maintenance, electricity and phone charges, auditors remuneration, depreciation, printing and stationery etc) were statutory in nature and had to be incurred even if no income could have arisen during the year and that, other than such expenses, the expenses were for day to day maintenan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax of the building from which office is run. It was pointed out that there was no sale and purchase of shares in the relevant previous year as the stock market was unstable and market conditions were not stable. There is no dispute about the fact that in the earlier years, the assessee was engaged in business of buying and selling shares and its income from this activity was brought to tax under the head Business income . The Assessing Officer rejected the explanation of the assessee by observing that as admittedly there was no business activity during the relevant previous year, no expenses could be allowed. The loss claimed by the assessee was disallowed, and the business income was assessed at nil . Aggrieved, assessee carried the matter in appeal before the CIT(A). The CIT(A) held that the Assessing Officer has not doubted genuineness of the expenditure, that the expenditure was necessary for running the organisation, that it was neither extravagant nor excessive, and that, therefore, the Assessing Officer was not justified in disallowing the same. The Assessing Officer is aggrieved of the relief so given by the CIT(A) and is in appeal before us. 4. Smt. Iyer, learned Depa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s upon is a judgment of Hon ble Allahabad High Court in the case of CIT v. Rampur Timbery Turnery Co. Ltd. [1981] 129 ITR 583. In this case, it was held that the expenditure incurred by a company, for retaining its status as company and for its continued existence as such, is allowable deduction, even after discontinuation of business in certain circumstances. On the strength of these precedents, he justifies the conclusions arrived at by the CIT(A). His next tier of defense consists of the proposition that only because no business activity is carried on in the relevant previous year, and in the absence of any categorical finding to the effect that business has closed for good, the Assessing Officer cannot jump to the conclusion that the business has ceased. The distinction between closure of business and suspension of business activity is sought to be highlighted and the relevant judicial precedents cited. In rejoinder, Smt. Iyer accepts that there is no categorical finding about closure of business, but she adds that the lack of such a finding cannot mean that expenses are to be allowed even as there is no business in existence. She reiterates her submissions and urges us to re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... forever. On the other hand, his books of account revealed that he was meeting the establishment charges and interest payments as detailed in the accounts in the year of accounts . It was then observed that the question whether the business is being carried on must depend in each case on its own facts and not on any general theory of law. Their Lordships then referred to, with approval, Lord Summer s observation in IRC v. South Behar Railway Co. Ltd. [1925] 12 Tax Cases 657 that business is not confined to being busy; in many businesses long intervals of inactivity occur. ... The concern is still a going concern though a very quiet one. After elaborate survey of judicial precedents on the issue, their Lordships concluded, in the light of, as noted above, the factual position that there is nothing on record to show that he completely abandoned or closed the business forever. On the other hand, his books of account revealed that he was meeting the establishment charges and interest payments as detailed in the accounts in the year of account, that the loss in arecanut business, in which admittedly no activity was carried out during the relevant previous year, was to be set off again ..... X X X X Extracts X X X X X X X X Extracts X X X X
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