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TMI Blog2021 (9) TMI 1137X X X X Extracts X X X X X X X X Extracts X X X X ..... h batches in A.Y. 2013-14 onwards. During the year assessee-company earned interest income from investment in flat made with M/s. Vigneshwara Developments Pvt. Ltd. He further noted that the assessee had shown NIL Revenue from operations and shown income under the Head "Income from other sources" interest of Rs. 46,03,500/- received from its investment in Flat made with M/s. Vigneshwara Developments Pvt. Ltd. Therefore, the assessee is not having any business receipts, but, mere interest receipts. 2.1. Since the assessee has not carried-out any business activity during the year and no business income has been declared, the A.O. asked the assessee to explain as why the expenses debited in the P & L A/c should not be disallowed. It was explained by the assessee that all the expenses incurred by the assessee are for the business purposes. 2.2. However, the A.O. was not satisfied with the explanation given by the assessee. He observed that apart from claiming salary expenses of Rs. 6 lakhs under the Head "Employee Benefits", the assessee has also incurred the following expenses : 1. Car running& maintenance Rs. 45,500/- 2. Car insurance Rs. 11,278/- 3. Entertainment ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are incurred to maintain office of Assessee-Company. Repair & Maintenance expenses are also incurred to maintain the office of Assessee-Company. Telephone Expenses are incurred in connection with amount provided to staff for communicating. It was accordingly submitted that all the expenses are incurred for the purpose of keeping and maintaining the office of assessee-company and to generate future business prospect for the assessee-company. Thus, all the expenses are allowable as business expenses to assessee-company. Referring to various decisions, it was submitted that expenses incurred to keep alive the corporate entity are allowable expenses. 2.5. However, the Ld. CIT(A) was not satisfied with the arguments advanced by the assessee and upheld the action of the A.O. by observing as under : "8.3. I have considered the facts of the case and the submission made by the AR. It is observed that the appellant has not shown any business income from operations during the year and the interest income has been shown as business income and various expenses have been claimed against this income. Despite specific show cause notice, the appellant failed to justify the claim of expenses agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. That the Ld. AO/Ld. CIT(A) has erred on the facts and circumstances of the case and in law in initiating the penalty proceedings under section 271(1)(c) of the Act. 6. That above grounds of appeal are mutually exclusive and without prejudice to each other. 7. The appellant craves leave to add, alter, amend and/or modify any of the ground ground(s) during or before the hearing of the appeal." 4. Learned Counsel for the Assessee did not press the Ground challenging the jurisdictional issue as per Ground of Appeal Number. 2, for which, the Ld. D.R. has no objection. Accordingly, Ground of appeal Number.2 is dismissed as not pressed. 5. Grounds of Appeal Numbers 6 and 7 being general in nature are dismissed. 6. So far as Ground of Appeal Number.3 is concerned, Learned Counsel for the Assessee submitted that assessee has not stopped its business activity and because of less number of students it was not viable for the assessee to run the business so assessee did not prefer to incur huge expenditure and thereby huge loss. Referring to the decision of Hon'ble Delhi High Court in the case of CIT vs., Integrated Technologies Ltd., in ITA.No.530/2011 Dated 16.12.2011, he submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the year. 8.1. I find an identical issue had come up before the Hon'ble Delhi High Court in the case of CIT vs., Integrated Technologies Ltd., (supra). In that case the assessee filed its return of income on 18.10.2004 declaring a loss of Rs. 4,85,08,380/-. During the course of assessment proceedings, the A.O. noted that the assessee has debited expenses amounting to Rs. 4,82,93,278/- in the profit and loss account, but, no business was done in the relevant previous year and there were no purchases or sales or manufacturing activities carried on by the assessee. The expenses claimed in the P & L A/c included depreciation, bad debts, raw material stock written off and administrative expenses. Since no business activities were carried out by the assessee, the A.O. disallowed the expenditure claimed by the assessee including depreciation on plant and machinery on the ground that the same were also not in actual use for the purpose of the assessee's business during the year. The Ld. CIT(A) directed the A.O. to allow administrative expenses, personal expenses and financial expenses as deduction, but, rejected the claim of depreciation. The Revenue accepted the order of the Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for its products. Thus, the finding of the Tribunal that the business of the assessee was not closed is fully supported by facts on record which have not been challenged by the revenue. The other question as to whether the plant and machinery should have been actually put to use in order to be entitled to depreciation under Section 32 and that mere passive use, in the sense that they were kept ready for use as and when the business was revived, would be sufficient compliance with Section 32 should not detain us since it has already been decided in the affirmative by at least three judgments of this Court. 9. The Tribunal has referred to the judgments in Capital Bus Service (supra), CIT Vs. Refrigeration and Allied Industries Ltd. (supra) & CIT Vs. Panacea Biotech Ltd. (supra) and has applied the ratio laid down therein to the facts of the present case. The ratio in brief is that it is not necessary that the plant and machinery owned by the assessee should be actually put to use in the relevant accounting year to justify the claim of depreciation and that even if the plant and machinery or other asset is kept ready for use in the assessee's business, the assessee would be en ..... X X X X Extracts X X X X X X X X Extracts X X X X
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