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TMI Blog2009 (5) TMI 840X X X X Extracts X X X X X X X X Extracts X X X X ..... siness activity. Therefore, it also cannot be said that the assessee could not use the BSE card on its own which was ready to use. In these circumstances, we are of the considered view that the assessee's business does not come to an end or discontinued. The meaning of discontinuation is explained in the Law Lexicon where it implies a voluntary act and abandonment of possession followed by the actual possession of another, it implies that the person discontinuing has given up the lend and left it to the possessed by anyone choosing to come in as held in the case of Qadir Bux v. Ramchand,[ 1969 (3) TMI 88 - ALLAHABAD HIGH COURT] . It is further explained at the same page at 563 of the Law Lexicon that discontinue ; to cause to cease or to put a stop . Neither is the business discontinued on account of voluntary act of the assessee nor has the same put to stop on its own. The business could not be done for the reason that the SEBI has barred the assessee not to do any business activity till further orders. The assessee was barred till further orders clearly means that the assessee was not barred permanently. The permanent order issued in the year 2007 and from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the BSE card and confirming depreciation on office equipments and various other expenses claimed on account of interest paid to bank and others and operational expenses and other expenses incurred on establishment. These disallowances were made on the reason that there was no business activity during the year under consideration for the reason that the Securities and Exchange Board of India has given instructions not to operate business and has also cancelled the registration of the assessee being involved in share scam. The Commissioner of Income-tax (Appeals) has also confirmed the action of the Assessing Officer for both these years. Now, the assessee is in appeal here before the Tribunal for both these years. Learned counsel for the assessee, who appeared before the Tribunal stated that no doubt Securities and Exchange Board of India has imposed restriction not to do any business activity because of alleged involvement in share scam. No doubt that the registration has also been cancelled by the Securities and Exchange Board of India, however, the direction of the Securities and Exchange Board of India in respect of not doing business activity and against cancelling of regi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at all because of the reason that the Securities and Exchange Board of India passed order on April 11, 2001, restricting the assessee not to do any business activity till further orders. No business has been done by the assessee ; therefore, the assessee is not entitled for any expenses for the year under consideration. Regarding the depreciation on the BSE card, it was submitted that the same was not used at all, therefore, depreciation cannot be allowed, if the asset is not used. Reliance was placed on various case laws reported in Chinai and Co. Pvt. Ltd. v. CIT [1994] 206 ITR 616 (Bom), CIT v. Gemini Cashew Sales Corporation [1967] 65 ITR 643 (SC), 194 ITR 334 ; Nathalal Asharam v. CIT [1992] 194 ITR 110 (Guj), CIT v. K. B. Kalikutty [1969] 73 ITR 533 (SC), CIT (Central) v. Moon Mills Ltd. [1967] 65 ITR 630 (SC) and CIT v. Lahore Electric Supply Co. Ltd. [1966] 60 ITR 1 (SC). In counter reply, learned counsel for the assessee stated that, various case laws relied upon by the learned Departmental representative are distinguishable on facts. For example, in the case reported in Chinai and Co. Pvt. Ltd. v. CIT [1994] 206 ITR 616, it was held by the hon'ble Bombay High Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2001 debarring them from undertaking any fresh business as a stock broker and merchant bankers till further orders should be continued. This action of the Securities and Exchange Board of India has been challenged by the assessee before the appropriate authorities. Copy of the petition filed before the Securities Appellate Tribunal is placed at page 94 of the paper book. In view of these facts and circumstances, the assessee was not allowed to do its business activity in share on the stock exchange floor. Not doing business activity was not on account of the assessee's will but on account of forced circumstances ; therefore, it cannot be said that the assessee has closed/discontinued its business activity on its own. The establishments of the assessee were intact and they were to be maintained. Staff members were kept and salaries were paid to them. Loans taken from various banks and others for the purpose of business activity in the past were outstanding during the year under consideration ; therefore, any interest, accrued was to be paid during the year under consideration or was payable. The assessee is having a valid BSE card which could not be used for the reason that the S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the business that it had been carrying on by supply of electricity and that business was interrupted only by reason of the Act. The possible resumption of the business was dependent on the outcome of the appeals pending before the Supreme Court. The amounts claimed were also not very substantial. The Tribunal had taken a broad view of the matter and had held in favour of the assessee. There was no ground to differ." The facts before the hon'ble High Court were that the assessee was a private electric company. Its undertaking vested with the State Government by reason of the enactment of the Tamil Nadu Electricity Supply Undertakings (Acquisition) Act, 1973. After an unsuccessful attempt to challenge the validity of that Act in the High Court, the assessee had filed appeals before the Supreme Court which were pending during the relevant years, i.e., the assessment years 1975-76 to 1979-80. The Assessing Officer held that the assessee was not carrying on any business and limited the salary paid to the employees of the assessee to 10 percent and the audit fee was limited to 15 percent That was affirmed by the appellate authority. However, the Tribunal held that the assessee was ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carry on its business in the manner in which it was accustomed to do was unauthorised, and to prevent enforcement of that order. Thereby, the company was seeking to obtain an order from the court enabling the business to be carried on without interference. The amounts expended by the company in that behalf were expenditure laid out wholly and exclusively for the purpose of its business and were deductible under section 10(2)(xv)." It was further held that (headnote of 63 ITR) : "the question of admissibility under section 10(2)(xv) had to be decided not on what was found or observed by the High Court in appeal from the order in the proceedings under section 45 of the Specific Relief Act or by the Privy Council but upon the findings of fact recorded by the Tribunal. Expenditure incurred to resist in a civil proceedings the enforcement of a measure, legislative or executive, which imposes restrictions on the carrying on of a business, or to obtain a declaration that the measure is invalid, would, if other conditions are satisfied, be admissible as a deduction under section 10(2)(xv)." The ratio of the decision of the apex court also goes in favour of the assessee as the lit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o such facts are involved as all the expenses incurred were in connection with the business activity only and for keeping the business alive, to maintain its business establishment and to meet the obligation of interest on loan, etc., taken for its business activity ; therefore, we hold that various expenses incurred by the assessee are allowable as deduction. However, admissibility of the expenditure was not examined by the Assessing Officer for the reason that he has disallowed the expenditure on the ground that they are not allowable as the assessee has not done any business activity. Therefore, for the purpose of examining the admissibility/ genuineness of these expenses, the matter is sent to the file of the Assessing Officer. The assessee has contended that depreciation and interest have been allowed by the Tribunal as allowable while passing order for the assessment year 2000-01. The Assessing Officer will take into consideration the order of the Tribunal and if it is found that facts are similar then of course, in view of the decision of the Tribunal, the claim of the assessee on account of depreciation and interest has to be allowed. Regarding the remaining expenses, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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