TMI Blog1992 (2) TMI 133X X X X Extracts X X X X X X X X Extracts X X X X ..... bed depreciation, against the income for the assessment year under consideration on the ground that business has discontinued. All observations made by the learned Commissioner of Income-tax (Appeals), in this connection, are contrary to facts already on record not only for this assessment year but also for the other assessment years in the appellant's assessment year but also for the other assessment years in the appellant's own case. 4. That the learned Commissioner of Income-tax (Appeals) was wrong in not allowing the following amounts claimed by the appellant-- (a) Rs. 15,000 being interest on the overdraft paid to a bank ; (b) Rs. 28,730 being legal expenses ; and (c) Rs. 4,66,487 being bad debts business loss. 5. That the learned Income-tax Officer was wrong in charging interest under section 217 of the Income-tax Act, ignoring the fact that the appellant is a non-resident company who is liable to receive all sums under deduction of tax at source as per the provisions of the Income-tax Act. " 2. The first two grounds deal with the power of the CIT(A) under section 251(1)(a) of the Income-tax Act, 1961. The brief facts are that the assessee filed a return of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11,34,420 and the order of the ITO made on the basis of the direction of the IAC was not proper in law. Thus, the CIT(A) enhanced the assessment of the assessee in the impugned order. It is against this order of the CIT(A) that the present appeal lies before us. 3. On behalf of the assessee it is submitted that the CIT(A) is not competent to enhance the income by Rs. 11,34,420 particularly when the assessment has been made by the ITO on the basis of direction given to him by the IAC acting under section 144B. Assessee's counsel contends that the object of enacting section 144B is to minimise the appeal. Thus in short according to him, the proceedings before the IAC under section 144B took the character of a mini appeal and since the ITO passed the final order on the basis of the order of the IAC the assessment order got merged with the appellate order which is the order of the IAC under section 144B. Since the assessment order had merged submits the assessee's counsel with the order of the IAC which is passed in a mini appeal under section 144B the CIT(A) cannot again reconsider the same issue which was duly considered by the IAC in the mini appeal proceedings under section 144B. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thority can do what the ITO could have done. To support this proposition Sri Sen has relied on the decision of the Hon'ble Supreme Court rendered in the case of CIT v. Kanpur Coal Syndicate [1964] 53 ITR 225. Adverting to the decision of the Special Bench rendered in the case of East Coast Marine Products Sri Sen submits that the same cannot be applied to the facts of the present case because the Special Bench was dealing with the powers of the CIT under section 263 in relation to an order passed by the ITO upon the direction of IAC under section 144B. The powers of CIT under section 263 cannot be equated with the powers of CIT(A) under section 251(1)(a) and, therefore, both these powers operate indifferent fields under different circumstances. Thus, according to revenue's representative the CIT(A) was still within his powers in enhancing the income of the assessee by Rs. 11,34,420 which he was authorised under section 251(1)(a) of the Income-tax Act, 1961. 5. After hearing the submissions made before us by the representatives of both the parties we find much force in the submissions made by the learned departmental representative. The proceedings under section 144B cannot be con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y forward loss of earlier years aggregating to Rs. 11,34,420 on the ground that since the assessee did not continue to carry on business during the previous year ending 31-121980 relevant for assessment year 1981-82. After the objections were filed by the assessee to the ITO's draft order under section 144B the matter rested with the IAC for consideration of the objections made by the assessee in this regard. The IAC after due consideration of the submissions made by the assessee and drawing support from judgment of various courts issued directions to the ITO to allow the carry forward and set off of unabsorbed losses from the income for this assessment year and the ITO accordingly followed the direction. As there were some other disputes the matter was taken to CIT(A) by way of first appeal. 7. As stated by us above the CIT(A) was of the opinion that the unabsorbed carry forward loss of earlier years was not directed to be allowed by the IAC was incorrect in law because according to him, the assessee did not continue to carry on business during the previous year relevant to the assessment year 1981-82 and, therefore, after following the procedure laid down under section 251(2) e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paper book to emphasise that the assessee was making efforts very sincerely to obtain new contracts and continue the work and it means, therefore, that the assessee was carrying on business. Continuing his argument the assessee's counsel submits that for the subsequent assessment years 1982-83 to 1984-85 the ITO has held that the assessee was continuing the business and has drawn our attention to the copies of assessment order for those years filed in the paper book. To emphasise his case the assessee's counsel submits that to carry on business does not always mean that a person should always be busy and doing some activity to earn profit. There are many businesses where there are long intervals of inactivity and yet it may still be a going concern though quite often dormant. It may also perhaps happen that a person may not be able to execute or do a single business activity or execute a particular contract for vary many years but yet it does not mean that the assessee had ceased to carry on business. There may be lull and inactivity of any business concern for a variety of reasons but yet its establishment functions and it pays salaries and incurs other expenses in fond hope and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 72 of the Income-tax Act. The conditions laid down under section 72 for taking the benefit of set off of carry forward of unabsorbed business losses fully satisfy the tests and conditions laid down under section 72 and the CIT(A) ought not to have invoked his powers under section 251(1)(a) and enhanced the assessment by disallowing the carry forward losses directed to be allowed by the IAC under section 144B. The assessee's counsel also emphasised that the assessee-company is a Germany based non-resident company and it has branches in other parts of the world where it is carrying on business. What is being assessed in India is the income of the assessee as failing within the purview of the Income-tax Act. That being the case, it cannot be said that the assessee-company was not carrying on any business at all. Thus, if a business is carried on in other parts of the world but those income cannot be assessed in India under the Indian Income-tax Act does not mean that the assessee is not carrying on any business at all. In support of his submissions the learned counsel has relied on the following decisions : (i) K.S.S. Soundrapandia Nadar Bros. v. CIT [1950] 18 ITR 163 (Mad.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of application of section 72 of the Income-tax Act. The moneys realised are received from arbitration in respect of DPL cannot also mean that the assessee-company was in business during the relevant previous year. The departmental representative has strongly relied on the order of the CIT(A) and urges that the CIT(A)'s order was correct and in accordance with law and should be upheld by us. 10. In order to decide this point in the appeal we have to first analyse as to what is 'business'. The Hon'ble Supreme Court in the case of Secretary, Madras Gymkhana v. Management AIR 1968 SC 554 has observed, 'business' means an enterprise which is an occupation as distinguished from pleasure. What is 'business' again came up for interpretation before the Supreme Court in the case of State of Andhra Pradesh v. H. Abdul Bakhi Bros. AIR 1965 SC 531 arising under Hyderabad General Salestax Act. The Supreme Court at page 532 observed as under : " ...... The expression 'business' though extensively used is a word of indefinite import, in taxing statute it is used in the sense of an occupation, or profession which occupies the time, attention and labour of a person, normally with the object of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it may be deemed to carry on its business, if during the period of lull and inactivity it is kept alive and if it retains its registered office and holds meetings. It is not necessary that a business to be in existence should have work all the time. There may be long intervals of inactivity and a concern may still be going concern, though it may for some time be quiet and dormant. The mere fact that a businessman has not been able to obtain a contract and the business has for some time been in that sense dormant would not mean that it has ceased to exist, if the assessee continues to maintain an establishment and incur expenses in the expectation that work would come and the business would be successful. How long he shall remain in the hope and in what manner he must carry on his work to gain success is primarily his own concern. The mere fact that for some time he is not able to secure a contract or do the work which he set out to do should not disqualify him from pleading that the expenditure that he had incurred was expended for the purpose of his business. " In the case of Bharat Nidhi Ltd. the Punjab High Court observed at page 528 as under : " The only factor that has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 itself and there was absolutely no necessity for it to maintain an office and incur those expenses in India which were avoidable. The other fact which weighs for consideration is that the assessee-company after the receipt of payment from DPL has not remitted a paisa out of India and in fact a 'no objection' certificate is obtained which is required by the Reserve Bank of India before sanctioning any remittance out of India. The argument of the assessee's counsel has appealed us that any big project contractor like the present assessee has to maintain its establishment and office in fond hope of getting further contracts or business in India. The assessee-company being a non-resident company cannot afford to wind up its establishment and office and again re-establish in India as and when it secured contract works. The argument of the assessee's counsel that the assessee company had its branches in other parts of the world carrying on business during the previous year should be considered as the assessee having carried on business in India for the purpose of benefit of section 72 of the Act has no force at all. The provisions of the Income-tax Act extend to whole of India and ther ..... X X X X Extracts X X X X X X X X Extracts X X X X
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