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TMI Blog2011 (3) TMI 426X X X X Extracts X X X X X X X X Extracts X X X X ..... ted:- 30-3-2011 - D. Manmohan, Rajendra Singh, JJ. Nitesh Joshi for the Appellant Arsi Prasad for the Respondent ORDER D. Manmohan Vice President: 1. This appeal by the assessee-company is directed against the Order passed by the CIT(A)-XXXIII, Mumbai and it pertains to the assessment year 2005-2006. Though the core issue, in the instant case, pertains to the allowability of depreciation under section 32 of the Income Tax Act, the learned Counsel, appearing on behalf of the assessee, raised several grounds. During the course of hearing, learned Counsel has argued on several facets connected to the main ground by filing the following additional grounds, apart from orally raising an additional ground with regard to taxability of income arising on account of foreign exchange fluctuation. 1. "The learned CIT(A) erred in not giving any findings to the without prejudice ground of appeal of the appellant that the Assessing Officer has not allowed the set off of the brought forward business losses and unabsorbed depreciation allowances of earlier years while computing the taxable total income against the income determined after disallowing appellants' claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In this regard, he observed as under: 3.3. The contention of the assessee has been duly considered but the same is not acceptable. Further, the assessee does not dispute the fact that no business activity has been carried out during the year and has also submitted that there is no intention of the business being carried out in the future as an application has already been made with the RBI for approval to close this office. The applicability of sec. 37 of the Income-tax Act, 1961 is restricted to a business in existence. The expression "expenditure laid out or expended wholly and exclusively for the purpose of assessee's business "indicates that the expenditure must relate to business in existence. If during the relevant period there was, in fact, no business, no question of computation of its income after deduction of expenses can possibly arise. Thus, it is held that in order to avail deduction of expenditure, it is necessary that the business, in response to which the expenses have been incurred, should be carried on by the assessee during the previous year. Hence the contention of the assessee is rejected and this amount of Rs.53,132/-, a break up of which is given below, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here was a temporary lull in the business it cannot be said that the business is closed in which event assessee would be entitled to claim depreciation under section 32 (1) of the Act on the business premises. In the alternative vide ground No.5, it was contended that the Assessing Officer erred in not allowing set off of brought forward business loss and unabsorbed depreciation of earlier years. 4. Undisputedly Assessing Officer has not taken into consideration ground No.5 urged before him. As regards the legal and professional fees and audit fees, learned CIT(A) observed that the assessee is in the process of closing the business in India and necessary permission was to be obtained in that regard and until such time assessee-company has to adhere to certain statutory requirements and for that purpose it had to incur certain expenditure. Under the circumstances, the aforementioned claim was allowed as deduction. 5. With regard to claim of deduction towards depreciation learned CIT(A) has taken into consideration an additional factor to uphold the Order of the Assessing Officer and in this regard he observed as under: "3. I have gone through the facts of the case. Let m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Counsel, appearing on behalf of the assessee, further submitted that the assessee offered to tax exchange fluctuation gain of Rs.11,25,000/- and the same having been accepted by the Assessing Officer he cannot disallow the claim of depreciation. In other words, Assessing Officer cannot blow hot and cold by claiming on one hand, that there is no business activity so as not to permit the assessee to claim depreciation whereas on the other hand accepting the exchange fluctuation gain as business income. Though no specific ground was urged in this regard, learned Counsel submitted that it is a pure legal issue for which no fresh facts are required and the same is in connection with the claim of depreciation and therefore, he requested for admission of this ground under Rule 27 of the Income Tax Appellate Tribunal Rules. 7. He further submitted that the Assessing Officer has not given any factual finding that the business was actually closed for the year under consideration but merely based upon the letter addressed to RBI in 2007; a letter addressed subsequent to the assessment year under consideration cannot be taken as the basis to hold that in the preceding year also there was ..... X X X X Extracts X X X X X X X X Extracts X X X X
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