TMI Blog1995 (5) TMI 48X X X X Extracts X X X X X X X X Extracts X X X X ..... nst paid-up capital of Rs. 10 lakhs. With the inadequate turnover, it was becoming impossible for the company to pay salary, wages, statutory dues etc., in time. The customers were preferring to get their work done at the site to save transportation, sales tax, excise duty etc., through the unorganised sector and, therefore, the assessee was finding it very uncompetitive. In view of these circumstances, the company made an application to the Government of Maharashtra on 19-11-1988 for closure of the factory which was rejected by the Government. Thereafter, assessee-company filed a writ petition in the Bombay High Court on 2-2-1989 for closure of the factory which was also rejected by the court. In order to avoid the future losses, the compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rk at customers site through sub-contractors was also rejected. It was also observed by the Assessing Officer that bills in the name of Acrow India Ltd., and Hindustan Construction Co. Ltd., seem to have been fabricated to show the continuity of the business in order to claim retrenchment compensation as well as carry forward of losses and depreciation. It was also observed by him that assessee had not done any work and the work done, if any, was through sub-contractors. He has also referred to the published accounts, particularly note-4 in Schedule 15 which states that the accounts of the company have been prepared on going concern basis as the company was exploring the new business activities. In view of this note, it has been observed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, management, account, etc., (ii) that the scheme announced by the company was voluntary retirement scheme and, therefore, payments made thereunder could not be understood as retrenchment compensation as assumed by the Assessing Officer ; (iii) that there was no relationship with the sub-contractors ; (iv) that the note No. 4 in the directors report was published by mistake. Actually this note pertain to the financial year ending 31-3-1989. In fact, the retirement took place in this year and payments were made in this year ; (v) that the closure of shops was out of commercial expediency in view of accumulated losses. The business through sub-contracts was more economic ; and (vi) that the judgments relied upon by the revenue wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al placed before us as well as the orders of authorities below and we do not find any material to take a contrary view in this regard. We are fortified in our conclusion by various Supreme Court judgments, latest being in the case of B.R. Ltd. 5.1 So, the next question that arises is that whether the assessee continued its business after the closure of its shops at Vikhroli. After going through the material placed before us, we find that there was no cessation of business. Assessee did carry on the business of fabrication job at customers site during this year as well as in subsequent years. The assumption of the lower authorities that the bills furnished by the assessee before the Assessing Officer in connection with the work done by M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e not justified in giving the finding that assessee did not carry on the business during this year. 5.2 As far as the continuity of the business is concerned, we find that in the accounting year 1990-91, assessee had done the business for Rs. 9 lakhs while in accounting year 1993-94 for Rs. 12.20 lakhs. These figures are supported by the balance-sheet for these years. Therefore, it is held that there was continuity of the business and there was no cessation of business during this year. 6. Now, let us examine the legal position on the facts found in the preceding paragraphs. The Madras High Court had to consider such a question in the case of CIT v. R.M. Maruthai Naidu Sons. In that case, assessee was carrying on the business in scent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d signed on 21-4-1989. The payment has also been made during this year and which is supported by the statement of accounts. Therefore, it cannot be said that expenditure was not incurred in this year as held by the Assessing Officer. 7. The judgments relied upon by the Assessing Officer are distinguishable on facts. In the case of M. Sheshadri Iyengar Sons, there was a finding that the entire business had been closed down and the liability to pay retrenchment compensation arose only in the subsequent year, i.e., after the closure of the business. In our view, the facts of that case are entirely different as there was no continuity of the business. In an another case relied upon by the revenue in India Mfrs. (Madras) P. Ltd's case assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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