SHIPPING TIMES (INDIA) P.LTD., MUMBAI v. ITO 8(3)(1), MUMBAI

ITA 4387/MUM/2008 | 2005-2006
Pronouncement Date: 14-05-2010 | Result: Allowed

Appeal Details

RSA Number 438719914 RSA 2008
Assessee PAN AAACS6738G
Bench Mumbai
Appeal Number ITA 4387/MUM/2008
Duration Of Justice 1 year(s) 10 month(s) 19 day(s)
Appellant SHIPPING TIMES (INDIA) P.LTD., MUMBAI
Respondent ITO 8(3)(1), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 14-05-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted J
Tribunal Order Date 14-05-2010
Date Of Final Hearing 10-05-2010
Next Hearing Date 10-05-2010
Assessment Year 2005-2006
Appeal Filed On 25-06-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH: MUMBAI BEFORE SHRI D K AGARWAL JUDICIAL MEMBER AND SHRI B RAMAKOTAIAH ACCOUNTANT MEMBER ITA NO 4387/MUM/2008 (ASSESSMENT YEAR: 2005-06) SHIPPING TIMES (INDIA) P LTD C/O. H N MOTIWALLA & CO 508 SHARDA CHAMBERS 33 NEW MARINE LINES MUMBAI -400 020 PAN : AAACS 6738 G VS ITO 8(3)(1) MUMBAI APPELLANT RESPONDENT APPELLANT BY: SHRI H N MOTIWALLA RESPONDENT BY: SHRI S M KESHKAMAT ORDER PER B RAMAKOTAIAH AM THIS IS THE ASSESSEES APPEAL AGAINST THE ORDER OF THE CIT (A) XXIX MUMBAI DATED 17.9.2008. THE ASSESSEE HAS RAISED THREE GRO UNDS ON THE ONLY ISSUE OF CLAIM OF EXPENDITURE DISALLOWED BY THE ASSESSING OFFICER HOLDING THAT THERE IS NO BUSINESS ACTIVITY DURING THE PREVIOUS YEAR. 2. THE ASSESSEE IS A COMPANY AND IS IN THE BUSINESS OF PRINTING AND PROCESSING SHIPPING TIMES OVER THE YEARS. THE ASSESSEE IS CARR IED OUT THE BUSINESS IN EARLIER YEARS AS WELL AS LATER YEARS WHICH IS EVIDENT FROM THE TURNOVER AND CLAIMS MADE BEFORE THE ASSESSING OFFICER AND CIT (A). THE EXPEN DITURES PERTAINING TO THAT BUSINESS ACTIVITY WAS DISALLOWED. IT WAS THE CONTE NTION OF THE ASSESSEE THAT THERE WAS ONLY A LULL IN THE BUSINESS DURING THE YEAR BUT THE BUSINESS CONTINUED AND HAS NOT BEEN CLOSED. THE ASSESSING OFFICER HOLDING THA T THERE WAS NO BUSINESS ACTIVITY CARRIED OUT DURING THE YEAR AND THE DEDUCTION OF EX PENSES U/S 37(1) IS ALLOWABLE ONLY IF EXCLUSIVELY SPENT FOR THE PURPOSE OF BUSINESS DI SALLOWED THE CLAIM OF EXPENDITURE. ITA 4387/M/2008 SHIPPING TIMES (INDIA) P LTD 2 HE RELIED ON THE DECISION OF THE HONBLE SUPREME CO URT IN THE CASE OF L M CHHABDA AND SONS VS CIT 65 ITR 638 S P B BANK LTD VS ACIT 126 ITR 773 (KER) AND PERFECT BOTTLE CO LTD VS CIT 166 ITR 196 (MP). ACCORDINGLY THE ASSESSING OFFICER DISALLOWED AN AMOUNT OF RS 7 86 406/- CLAIMED UNDER THE BUSIN ESS HEAD. 3. THE ASSESSEE OBJECTED THE SAME BEFORE THE CIT (A ) AND SUBMITTED THAT THERE IS NO ACTIVITY IN RESPECT OF PRINTING AND PROCESSING D URING THE YEAR BUT THERE ARE RECEIPTS FROM THE ACTIVITY OF RS 3 99 289/- FOR AY 2004-05 A ND ALSO IN SUBSEQUENT YEARS TO THE EXTENT OF RS 23 25 700/- IN AY2006-07 AND RS 29 07 700/- IN AY 2007-08. IT WAS THE SUBMISSION THAT DURING THE YEAR PROCESSING BUSINESS WAS NOT DONE BUT THE BUSINESS HAS NOT BEEN CLOSED. FURTHER IT WAS ALSO CONTENDED THAT THE DECISION RELIED UPON BY THE ITO WAS GIVEN IN THE CONTEXT OF THE BUS INESS THAT WAS DISCONTINUED AND THEREFORE THEY ARE NOT APPLICABLE TO THE FACTS OF THE CASE. THE ASSESSEE RELIED ON KARSONDAS RANCHHODDASS VS CIT 83 ITR 1 (BOM) AND IN DERCHAND HARI RAM VS CIT 23 ITR 437 (ALL) AND MRS SAROJINI RAJAH VS CIT 71 ITR 504 (MAD). 4. THE CIT (A) HOWEVER AGREED WITH THE ASSESSING OFFICER STATING THAT THE EXPENDITURE IS ALLOWABLE ONLY IF THERE IS BUSINESS WHICH WAS CARRIED ON. WHILE ACCEPTING THAT IT IS NOT NECESSARY THE INCOME IS EA RNED THE CIT (A) WAS OF THE OPINION THAT FOR CLAIMING THE EXPENDITURE THE BUSIN ESS SHOULD BE IN EXISTENCE AND SINCE THE ASSESSEE WAS NOT HAVING BUSINESS DURING THE YEAR THE EXPENDITURE CANNOT BE CLAIMED. 5. WE HAVE HEARD THE LEARNED COUNSEL AND THE LEARNE D DEPARTMENTAL REPRESENTATIVE IN DETAIL. 6. AS SEEN FROM THE FACTS OF THE CASE THE ASSESSEE HAS NOT DISCONTINUED THE BUSINESS AT ALL AND THERE IS ONLY A TEMPORARY STOPP AGE DURING THE YEAR UNDER CONSIDERATION. THE ASSESSEE HAS OFFERED INCOME FRO M THE PROPERTY AND INTEREST ITA 4387/M/2008 SHIPPING TIMES (INDIA) P LTD 3 INCOME MACHINE HIRE CHARGES AND ALSO SHORT TERM CA PITAL GAIN. THIS INDICATES THAT THE COMPANY HAS CONTINUED ITS ACTIVITIES DURING THE YEAR AND PART OF ACTIVITY IS BUSINESS IN NATURE LIKE MACHINE HIRE CHARGES RECEIV ED. ONLY ACTIVITY THAT WAS NOT DONE DURING THE YEAR IS PRINTING AND PROCESSING OF ITS SHIPPING TIMES BUT IT CANNOT BE CONSIDERED AS BUSINESS NOT IN EXISTENCE. HON BLE BOMBAY HIGH COURT IN THE CASE KARSONDAS RANCHHODDASS VS CIT 83 ITR 1 (BOM) HAS HE LD THAT A CLEAR DISTINCTION HOWEVER SHOULD BE KEPT IN MIND BETWEEN THE CESSATI ON OF A BUSINESS AND TEMPORARY LULL IN THE BUSINESS ACTIVITY. THE LOSS INCURRED B Y AN ASSESSEE ON THE SALE OF CERTAIN SHARES CANNOT BE TREATED AS A CAPITAL LOSS MERELY B ECAUSE ALTHOUGH THE ASSESSEE WAS DEALER IN SHARES THERE WAS A LONG PERIOD OF IN ACTIVITY ATTRIBUTABLE NOT TO AN INTENTION TO DISCONTINUE THE BUSINESS BUT ONLY TO A CERTAIN TEMPORARY STOPPAGE . SIMILARLY THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF INDERCHAND HARI RAM VS CIT 23 ITR 437 CONSIDERED SIMILAR FACTS AND HELD TH AT IT IS NOT NECESSARY THAT A BUSINESS TO BE IN EXISTENCE SHOULD HAVE WORK ALL TH E TIME. THERE MAY BE LONG INTERVALS OF INACTIVITY AND A CONCERN MAY STILL A G OING CONCERN THOUGH IT MAY FOR SOME TIME BE QUITE AND DORMANT. 7. FROM THE ABOVE DECISIONS IT IS VERY CLEAR THAT TEMPORARY LULL OR INACTIVITY CANNOT BE CONSIDERED AS CESSATION OF BUSINESS OR NO N-EXISTENCE OF BUSINESS. THE DECISIONS RELIED UPON BY THE AO AND CIT(A) ARE IN T HE CONTEXT OF CLOSURE OF BUSINESS WHICH HAVE NO RELEVANCE TO THE FACTS OF THE CASE. 8. AS SEEN FROM THE NATURE OF EXPENDITURE ALSO THE EXPENDITURE IS IN THE NATURE OF SALARY AND BONUS RENT-RATES AND TAXES REPAIRS & MAINTENANCE AND ARE MAINLY ASSOCIATED WITH MAINTENANCE ACTIVITY OF THE COMPANY AS SUCH. IN VIEW OF THIS WE ARE OF THE OPINION THAT ASSESSING OFFICER AND CIT (A) H AS ERRED IN NOT ALLOWING THE EXPENDITURE TO THE ASSESSEE. SINCE THERE IS ONLY A LULL IN THE BUSINESS ACTIVITY AND ASSESSEES BUSINESS AS SUCH HAS CONTINUED DURING TH E YEAR IN OTHER SPHERES OF ACTIVITY AND EVEN THE PRINTING AND PROCESSING BUSIN ESS HAS CONTINUED IN LATER YEARS ITA 4387/M/2008 SHIPPING TIMES (INDIA) P LTD 4 WE DIRECT THE ASSESSING OFFICER TO ALLOW THE EXPEND ITURE AS CLAIMED. ACCORDINGLY THE GROUNDS ARE CONSIDERED ALLOWED. 9. APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT TODAY ON THE 14TH DAY OF MAY 2010. SD/- (D K AGARWAL) JUDICIAL MEMBER SD/- (B RAMAKOTAIAH) ACCOUNTANT MEMBER MUMBAI DATE: 14TH MAY 2010 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A)-XXIX MUMBAI. 4) THE CIT 8 MUMBAI. 5) THE D.R. J BENCH ITAT MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR CHAVAN* I.T.A.T. MUMBAI ITA 4387/M/2008 SHIPPING TIMES (INDIA) P LTD 5 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 10.5.2010 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 11.5.2010 SR.PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/A M 5 APPROVED DRAFT COMES TO THE SR.PS SR.PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS 7 FILE SENT TO THE BENCH CLERK SR.PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER .