TMI Blog2011 (7) TMI 1351X X X X Extracts X X X X X X X X Extracts X X X X ..... t the existing ongoing contractual obligations. The business infrastructure and other related activities were continued to keep in readiness the business infrastructure to enable the company to carry on its business though during the year due to a sudden slack in the business, the business activities were carried out at a very low key. The Assessing officer has held that the business activities were closed down and has accordingly disallowed expenses earned in continuing the business activities of the assessee. The surplus funds in the business were according to the assessee gainfully employed to maximize the returns for the time being and such interest earned on the surplus funds in the course of business was accordingly shown as business income. The AO has assessed the income as income from other sources. Further income received from professional fees received by the appellant during the assessment year has also been taxed as income from other sources. The AO has also disallowed the depreciation claimed by the appellant company on the goodwill. 4. Before the Ld. CIT(A), the AR of the assessee submitted as follows: The AO disallowed the following expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Surveys and Environment. It was admitted by the appellant company that this business was closed during October, 2002 because all employees left the organization. After that the appellant has started the new business of Call Centre and Business Process Outsourcing. The AO has held that in the year under consideration not even a single employee was working in the company to look after the old business. The new business of call centre was started and in the year under consideration, the appellant has claimed business expenditure relating to the old business which was disallowed by the AO by holding that the business of the company was closed in October, 2002. The income of the new business relating to interest received was assessed under the head income from other sources, therefore, the expenditure debited to P L A/c was disallowed. Before me, the appellant has argued that the business activities were continued to meet the existing ongoing contractual obligations. But no evidence was submitted before me to substantiate its claim. The appellant also relied on the decision of the Hon ble Court to strengthen his view. Since the facts of this case is different because ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of payment and pointed out only clause (e) which is 20% on obtaining environmental clearance from MOEF had not been completed. Hence the DR objected to the statement of the assessee that the bills were not raised because they had not reached the billable stage when only a small percentage of work was to be completed. He further pointed out that parties to whom fee income stated to have been received are Tata Group companies which are closely connected to the assessee. 10. The Ld. Counsel for the assessee on the other hand stated that the business activities were continued to meet the existing ongoing contractual obligations and it is not relevant that the parties are closely connected or not. The short point for consideration is whether the business has to be taken as closed down or to be continuing in a slack manner at a low key for fulfilling the existing contractual obligations. As held by the Madras High court in the case of Vairavan Chettiar Vs CIT 72 ITR 114 wherein it has been held as follows: The question whether a business was being carried on or discontinued must depend in each case on its own facts. It is not necessary that business to be in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... since the business of the assessee is of call centre and BPO, therefore, the interest earned on surplus amount cannot be assessed under the head income from business income as it is held in the case of CIT Vs Pandian Chemical Ltd. CIT Vs Sterling Foods by the Hon ble Supreme Court . Keeping in view all these facts and circumstances, the Ld. CIT(A) inclined to agree with the decision of the AO and the action is upheld. 15. The Ld. CIT(A) confirmed the order of the AO. 16. We heard both the parties. We find that the assessee has earned interest of 12,32,839/- on inter corporate deposits and ₹ 1,42,710/- as interest from other investments. The surplus funds from the business had to be employed in the course of business for maximizing the income as the assessee has already in transition from one business to another. Therefore we are of the view that the interest income is to be treated as business income relying on the decision in the case of Sujay Trading (P) Ltd., Vs JCIT, Mumbai ITAT Bench G-Third Member. 17. The 4th ground relates to compensation under VRS for the assessment year 2002-03 and 2003-04 etc. 1/5th expenditure has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat there is no asset in the books as on 31.3.2005. 22. Before the Ld. CIT(A), the ld. AR submitted as follows: The AO has wrongfully disallowed the depreciation claimed by the appellant company on the Goodwill. The appellant company revised its estimates of the useful life for Goodwill and charged off the entire carrying value to the Profit and Loss account in this previous year. Earlier, Goodwill was amortised equally over a period of 10 years as per its accounting policy. However, this goodwill was neither sold nor discarded and hence for income tax purposes since the intangible asset was available in Block of assets, the depreciation on goodwill was rightly claimed. The AO only for the reason it was written off in the books due to accounting exigencies has disallowed the claim of depreciation on Goodwill. In this regard we would like to draw your Honours attention the decision of Delhi High Court in the case of CIT Vs Yamaha Motor India Pvt. Ltd. wherein it was held that: The expression used for the purpose of the business as found in Sec. 32 of I.T. Act, 1961 when used with respect to discarded machinery would mean that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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