VISHWALAXMI TRADING & FINANCE P.LTD,MUMBAI vs. ASST CIT CIR 8(3), MUMBAI

On the facts and circumstances of the case as well as in Law, the Learned CIT(A) has erred in confirming the action of Learned Assessing Officer in not considering the explanation given by the appellant for claim of Assessment Year: 2009-10 expenses and depreciation during the year, without considering the facts and circumstances of the case.

On the facts and circumstances of the case as well as in Law, the Learned CIT(A) has erred in confirming the action of Learned Assessing Officer in not allowing to carry forward, the Business Loss of Rs.3,16,32,702/- without considering the facts and circumstances of the case.

On the facts and circumstances of the case as well as in Law, the Learned CIT(A) has erred in confirming the action of Learned Assessing Officer in not allowing netting of interest income with interest expenses and making an addition of Interest amounting to Rs.9,30,390/- as Income from other sources, without considering the facts and circumstances of the case.

The assessee filed return on 25.09.2009 declaring total loss of Rs.3,18,23,121/-. The return of income was duly processed u/s. 143(1) of the Income Tax Act, 1961 (in short ‘ the Act’). The case was selected for scrutiny therefore; notice u/s. 143(2) of the Act was issued to the assessee company on 18.08.2010 which was duly served. Subsequently, notice u/s.142(1) of the Act was issued to the assessee on 06.05.2011 calling for various details/ documents. In the return the assessee company had shown loss of Rs. 3,16,32,702/- under the head ‘Business’. On scrutiny of the preceding year assessment, the credit to the P&L Account was on account of dividend of Rs.1,25,02,500/- and share of loss of Rs.12,362/- from Oxford Moulding where the assessee company is a partner. The dividend income falls under the head ‘Income from Other Sources’ and was exempted by virtue of section 10(34) of the Act. So far as the loss of the share from the partnership firm, the same was also come u/s. 10(2A) of the Act. However, P&L Account’s reveals that the claimed deduction under the head of income business amounting to Rs. 4,41,80,907/- on account of administrative expenses, financial expenses and depreciation. All these expenses resulting to claim loss of Rs.3,16,32,702/- under the head ‘Business’. On seeing return, the A.O. had arrived at this conclusion that the assessee company did not do any business. Therefore, the said claim was not allowable, hence, the loss to the tune of Rs.3,16,32,702/-was disallowed and the other contention was in connection with the disallowance of interest to the tune

We have heard the arguments advanced by the representatives of the parties and have gone through the records carefully. The learned representative for the assessee has argued that the assessee was engaged in the business and object of the business has been explained in the Memorandum of Association of Vishwalaxmi Trading & Finance Pvt. Ltd. in clause (A) and accordingly the assessee company was doing the business and also draw the attention of the Tribunal towards the order dated 30.10.2009 passed u/s 143(3) of the Act for the assessment year 2007-08, wherein the nature of business of the assessee has been explained and accordingly the assessment was finalised and it is specifically argued that there is temporary lull in the business, therefore, no business has been shown in the said specific period and assessing officer presumed that the firm was not doing business, and therefore, declined the claim for the assessee. Hence, the order of the learned CIT(A) dated 20.10.2012 is wrong against law and fact and is liable to be set aside. Contrary to it the learned departmental representative strongly supported the order passed by the learned CIT(A) in the light of the argument made by the learned representative of the parties and by perusing the record carefully it came into the notice that the Memorandum of Association of the assessee company speaks about its object which is hereby as under:-

The Assessee company has also filed the assessment order dated 30.10.2009 for the assessment year 2007-08 has been shown on page 20 of the paper book which speaks about the business of the assessee company. Undoubtedly, the assessing officer only considers the claim for the period of assessment i.e. assessment year 2009-10. No doubt, it may happen that there was temporary lull in the business, therefore, no business income has been shown in that particular period. The assessee has shown the P&L A/c in the paper book wherein he was drawing the claim on the basis of earlier assessment year which was properly considered by the assessing officer. No doubt, declining the claim of the assessee without considering the earlier assessment year or without considering the claim of the assessee which has been reflected in the ledger and account book or without considering the temporary lull in the business, anyhow, in the view of the said observations we are of the view that the claim of the assessee is required to be further verified on the basis of observations above and accordingly, is required to be decided in accordance with law. Therefore, in the said circumstance we set aside the order of the learned CIT(A) on this ground and direct the A.O. to verify the claim of the assessee afresh, in view of the observations made above. The other point which has been raised by the representative of the assessee is that the A.O. has not allowed net of interest income with interest expenses and make an addition of the interest amounting to Rs.9,30,390/- as income from other sources.

The A.O. has recorded the reasons in this regard that there is not corresponding credit of the interest to the P&L Account. However, the 4 Assessment Year: 2009-10 assessee’s representative explained that the interest received has been netted off against interest payment and the net interest is debited to the P&L Account. Pursuing to the P&L Account for the year ending on 30.03.2009 which has been reflected at page 10 of the paper book and on pursuing of statement of finance cost for the assessment year 2009-10 which has been reflected at page 19 of the paper book, it seems that the interest received has been netted off against the interest payment and the net result is debited to the P&L Account. In view of the above mentioned facts, we are of the view that this matter is required to be verified again on appraisal of the details of P&L Account and for verification, the matter is required to be set aside. Hence the order of the learned CIT(A) dated 22.10.2012 in question is hereby set aside and both the issues are hereby ordered to be resorted back to A.O. for a fresh consideration.

Accordingly the appeal of the assessee is treated as allowed for statistical purposes.

""यथ" / The Respondent. 3. आयकर आयु"त(अपील) / The CIT(A)- 4. आयकर आयु"त / CIT

"वभागीय ""त"न"ध, आयकर अपील"य अ"धकरण, मुंबई / DR, ITAT, Mumbai 6. गाड" फाईल / Guard file.