TMI Blog2019 (2) TMI 986X X X X Extracts X X X X X X X X Extracts X X X X ..... he profit and loss of the subsequent years shows that there were considerable materials consumed by the assessee company in the said trading of cotton business. The gross receipt of the assessee became high during the subsequent years which establishes the fact of there being temporary lull in the business activity of the assessee during the year under consideration.The reason which was shown by the assessee while replying the show-cause issued by the AO for such lull in the business seems to be justified which was again not attended by the Learned CIT(A). There was a temporary suspension and/or lull in the business of the assessee and thus the assessee is entitled to the claim of deduction u/s 37(1) of the Act, which was incurred by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 631/- representing interest received from other parties were disclosed by the assessee. No other revenue earned was reported during the year under consideration. The assessee claimed the following expenditure; Sr. No. Nature of Expenses Amount 1. Employee Benefit expenses : Rs.12,00,000/- (being remuneration paid to directors) 2. Financial costs (includes bank : Rs.11,52,593/- charges, bank interest and interest paid on deposits) 3. Depre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 2013-14 onwards. The chart showing income from operation from A.Y. 2013-14, 2015-16 to 2017-18 has been handed over to us by the Learned Counsel appearing for the assessee. The Learned Counsel for the assessee further submitted before us that there was inadvertent error committed by the Revenue in not allowing current year business loss of ₹ 3,00,705/- which was subsequently rectified copy whereof was also submitted before us. 5. The balance sheet, profit and loss account along with the notice and statement of total income of A.Y. 2013-14, 2015-16, 2016-17 2017-18 was also placed on record by way of paper book filed by the assessee before us to establish that the assessee is still in the trading business of cotton and there was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee sought to justify the continuity of business by stating that during the financial year 2012-13 2013-14 Company has affected sales and paid Vat thereon. It was further contented by the assessee that there is no compulsion that in each Financial Year the company has to affect sale even if the market condition is not favorable. The assessee by and under a further reply dated 20.11.2014 submitted the following: ------Further it is submitted that your honour has raised the question of non operative income during the year. It is submitted that there was active participation by all the Directors to conclude business in cotton during the year but it could not materialize on account of : [a] Excess credit demanded by the customers withou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 25 Company to take up nonprofit activity and hence Business must be treated as part of its very existence. In addition to the said reply reliance were made in the judgment passed by General Corporation Ltd.-vs-CIT, 3 ITR 350, CIT-Vs-Bharat Nidhi Ltd., 60 ITR 520 (PUNJ) Inderchand Hariram-vs-CIT, 23 ITR 437 (ALL.). However, the contention made by the assessee was not accepted by the Learned AO and he thereafter made the entire expenditure claimed by the assessee as deduction u/s 37(1) of the Act aggregating to ₹ 24,20,798/- and the depreciation claimed u/s 32 of the Act at ₹ 55,808/-; the entire amount of ₹ 24,76,606/- were added to the total income of the assessee against which appeal was preferred before the L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome. !n fact, it has been admitted by the appellant that the FDRs were placed with banks in order to earn interest income. It is also seen from the submissions and financial statements that even in earlier year i.e. Asst. Year 2011-12, interest on FDRs was shown by the appellant as income from other sources. Considering the facts of the case, I am of the view that the appellant company has not done any business activity during the year under consideration and even during the following two financial years, the action of the AO in disallowing the expenditure claimed by the appellant since the same has not been incurred wholly and exclusively for the purpose of business, is upheld. The action of the AO in treating the interest earned on FDRs o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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