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Income Tax Appellate Tribunal, MUMBAI BENCH “D” MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI N.K. PRADHAN
ORDER PER N.K. PRADHAN, A.M This is an appeal filed by the assessee. The relevant assessment year is 2009-10. The appeal is directed against the order of the Commissioner (Appeals)-9, Mumbai and arises out of the assessment completed u/s 143(3) of the Income Tax Act 1961, (The ‘Act’).
The grounds of appeal filed by the assessee reads as under:-
i. The Ld. CIT(A) erred in confirming the disallowance made by the A.O. of depreciation of Rs. 4,22,197/- to the operating expenses of Rs. 59,16,245/- and adding an amount of Rs. 4,17,212/- to the income on account of interest on FD of Rs. 4,17,212/-. Your Petitioner humbly submits that the expenses ii. disallowed are in the nature of revenue expenses and hence the disallowance should be set aside. iii. Your petitioner prayers that the disallowance depreciation of Rs. 4,22,197/-, operating expenses of Rs. 59,16,245/- and adding an amount of Rs. 4,17,212/- to the income on account of interest on FD of Rs. 4,17,212/- be set aside.
The learned counsel of the assessee submits before us that the assessee would not press the ground of appeal in respect of interest on FD amounting to Rs. 4,17,212/- treated by the Assessing Officer(A.O.) as income from other sources. Accordingly the ground of appeal in respect of the above item is dismissed as not being pressed.
Now we come to the other ground of appeal relating to the disallowance made by the A.O. of (i) depreciation of Rs. 4,22,197/- and (ii) operating expenses of Rs. 59,16,245/-. Briefly stated the facts of the case are that the assessee-company is engaged in the business of operation of ships, charter hire services, ship management services and has opted under tonnage tax scheme. During the course of assessment proceedings, the A.O. observed from the details filed by the assessee that the assessee had a tug which was in the nature of non-qualifying ship. The income from the same was shown under non-tonnage income by the assessee. Against such non-tonnage income, the assessee had claimed loss to the tune of Rs. 59,07,586/-. The A.O. observed that the tug Everpower had charter hire income of Rs. 25,000/- and as per the details filed by the assessee, it was idle for 99.72% during the F.Y. 2008-09 relevant to the A.Y. 2009-10. As the tug Everpower was not in full operation during the F.Y. 2008-09, the A.O. disallowed the claim of expenses of Rs. 59,16,245/- and added to the total income of the assessee.
4.1 The assessee had claimed depreciation of Rs. 4,46,332/- in its computation. Out of this, depreciation of Rs. 1,09,044/- related to non-tonnage tug i.e. ‘Everpower’. The A.O. disallowed Rs. 1,09,044/- as the same was not considered to be used in the F.Y. 2008-09. As regards the balance depreciation of Rs. 3,37,288/- which related to the common assets, the A.O. apportioned it between tonnage income and other income on the basis of turnover of tonnage activity and income received on account of ‘other income’. In the process, the A.O. disallowed depreciation amounting to Rs. 3,13,153/- relating to tonnage activity. Thus the total disallowance of depreciation made by the A.O. was Rs. 4,22,197/- (Rs. 1,09,044/- plus Rs. 3,13,153/-).
Aggrieved by the order of the A.O. the assessee filed an appeal before the learned CIT(A). The learned CIT(A) noted the observation of the A.O. that the assessee did not file before him ‘any details in respect of the chartering service provided by Everpower like the services provided, the nature of charter income, on what account was the same received, name of the party from whom the income was received, documentary evidence in support of the same.’ The learned CIT(A), during the course of appellate proceedings before him asked the assessee vide order sheet entry dated 22.05.2012 to produce the original vouchers in support of gross receipts and expenditure. However, vide letter dated 06.07.2012 the assessee informed the learned CIT(A) that the relevant appeal file was misplaced. The assessee could not produce before the learned CIT(A), the original vouchers for gross receipts. The learned CIT(A) further observed that neither the name nor complete address nor identity of the person for whom the tug ‘Everpower’ was operated in F.Y. 2008-09 was furnished. In view of the above, the learned CIT(A) confirmed the disallowance of operating expenses of Rs. 59,16,245/- and depreciation of Rs. 4,22,197/-.
Before us, the learned counsel of the assessee filed a paper book containing (i) copy of letter dated 22.05.12 addressed to the CIT(A), (ii) copy of letter dated 16.12.11 addressed to A.O. along with enclosures, (iii) copy of purchases invoice dated 15.11.99 of tug, ‘Everpower’ along with copy of Memorandum of Agreement and (iv) copy of income invoice dated 24.12.08 of tug, ‘Everpower’ along with enclosures. Reliance was placed by him on the decision in the case of CIT vs. Oil & Natural Gas Corporation Ltd. (2016) 387 ITR 710 (Uttarakhand), ACIT vs. National Peroxide Ltd. (2003) SOT 321 (Mum). The learned counsel submits that the last major charter higher contract executed by the tug was for Marine Engineer Karwar, Govt. of Karnataka from 24.02.2002 to 05.02.2008. After the expiry of the contract the tug being aged 33 years (year built: 1977) and having a bollard pull of 7 tonne not suitable for harbour operations / inland operations, was idle for 99.72% and 82% in 2008-09 and 2009-10 respectively. During the year 2008-09, the operating expenses incurred on the tug included mandatory intermediate dry dock for the period 04.02.2009 to 11.05.2009 amounting to Rs. 19.15 lacs in 2008- 09 and Rs. 8.37 lacs in 2009-10.
Per contra the learned DR relies on the order of the learned CIT(A). He submits that the assessee failed to submit before the A.O. and the learned CIT(A) the material or evidence to prove that the tug Everpower was operated or used for earning gross receipts of Rs. 25,000/- during the F.Y. 2008-09. Neither the name nor complete address nor identity of the person for whom the tug Everpower was operated during the F.Y. 2008-09 was furnished.
We have heard the rival submissions and perused the relevant material on record. A company may not obtain, or be able to execute, a single business contract for months and yet it may be deemed to carry on its business, if during the period of lull and inactivity, it is kept alive. 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 a going concern, though it may, for some time, be quiet and dormant. We may fruitfully refer to the decision in the case of L. Ve. Vairavan Chettair vs. CIT (1969) 72 ITR 114, 119 (Mad); General Corporation Ltd. vs. CIT (1935)3 ITR 350, 355 (Mad); CIT vs. Bharat Nidhi Ltd. (1966) 60 ITR 520 (Punj); Inderchand Hari Ram vs. CIT (1953) 23 ITR 437, 442-3 (All); Karsondas Ranchhoddas vs. CIT (1972) 83 ITR 1, 20 (Bom); Mrs. Sarojini Rajah vs. CIT (1969) 71 ITR 504 (Mad).
8.1 However it is found that the assessee failed to file before the A.O. and the learned CIT(A) the material or evidence in respect of the receipt of Rs. 25,000/- as narrated at para 5 here-in-above. Therefore, the case of the assessee is distinguishable from the decision relied on by the learned counsel of the assessee.
In CIT vs. Calcutta Agency Ltd. (1951) 19 ITR 191 (SC), it has been held that the burden of proving the necessary fact in order to entitle the assessee to make a claim is on the assessee. The same ratio has been reiterated in Nund & Samont Co. (P) Ltd. vs. CIT (1970) 78 ITR 268 (SC). The burden of proof is limited to primary or initial onus. One such primary onus is discharged, such burden shifts to revenue. We find that in the instance case the assessee has not discharged the primary onus. In view of the above, the order of the learned CIT(A) is set aside and the case is restored to the file of the A.O. with a direction to make an order afresh as per the provisions of the Act and the observations made at para 8 here-in-above, after giving a reasonable opportunity of being heard to the assessee. The assessee is directed to file before the A.O. the details mentioned at para 5 here-in-above. Thus the above ground is allowed for statistical purposes.
In the result, the appeal is partly allowed.
Order pronounced in the open Court on 28/04/2017