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TMI Blog2019 (7) TMI 988X X X X Extracts X X X X X X X X Extracts X X X X ..... the benefit of set off of business loss which is in fact, business expenditure against the other income for all the three assessment years under consideration. In Kisan Sahkari Chini Mills. Ltd. [ 2004 (11) TMI 77 - ALLAHABAD HIGH COURT] it has been held that Section 57 provides for deductions which are admissible from the income taxable under the head income from other sources . If a particular expenditure falls strictly under the sub-clause of Section 57 only then it is liable to be allowed as expenses otherwise not. It was further held that expenditure incurred on maintenance of the office and for planning of construction does not fall under any of the sub-clauses of Section 57 and therefore, the assessee could not have allowed the expenses as deduction from the interest income. Sub-Clause (ii) of Section 56(1) speaks of income from machinery, plant or furniture belonging to the assessee. Admittedly, no such income was generated and therefore, the claim of expenditure to be a business loss and to be set off against the income from house property is a plea which has to be necessarily rejected. Appeal stands dismissed and the substantial question of law is answered agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y sheds were maintained with the hope of getting orders. 5.Further, the assessee continued all its licenses, telephone and electricity connections and also retained their existing staff strength only with the object of procuring the orders profitable to the assessee company. The assessee could not get sufficient orders from the Electricity Board due to the fact that the value of raw material was very competitive and payments from the electricity boards was not received on time. It was pointed out that for the assessment year 2001-02, the explanation offered by the assessee was accepted by the Tribunal. Therefore, the assessee submitted that the claim of business expenses be allowed due to the above stated facts. The assessment was reopened primarily on the ground that for the year under consideration, there was no manufacturing or sale of any commodity and the other income mainly included electricity and maintenance charges collected from the tenants and paid to the Electricity Board. As against the income, the assessee claimed huge expenditure and loss under the head business . 6.The Assessing Officer pointed out that the questio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me Tax (Appeals)-XII, Chennai (for brevity, the CIT(A) ), who by order dated 21.03.2006, affirmed the order passed by the Assessing Officer. The assessee carried the matter by way of appeal to the Tribunal which affirmed the order passed by the CIT(A) and this is how the assessee is before us by way of this appeal. 10.The learned counsel elaborately set down the factual position and endeavoured to convince this Court that the assessee did not close down its business, but was maintaining the machinery such as paying salary to the employees, renewal of license with a faint hope that orders would be placed on the assessee company so as to enable them to revive the manufacturing activity. It is further submitted that the Tribunal ought to have allowed the assessee's appeal, since in respect of the same issue for the assessment year 2001-02, the Tribunal by order dated 31.08.2004, has decided the case in favour of the assessee. 11.It is submitted that the decision of this Court in the case of P.V.Gajapathi Raju vs. CIT reported in (1989) 176 ITR 0238, is clearly distinguishable on facts and the CIT(A) erroneously applied the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ution and entered into a memorandum of understanding with their sister concern, switched over to marketing of products manufactured by third parties. Thus, it is the submission that without business activity, neither business expenditure, nor business loss can be claimed. 17.Further, it is submitted that there are two types of income, viz., active income where there is requirement to have a business income and there should be an activity such as manufacturing activity whereas, running of property such as in the assessee's case are all passive income and thus, both cannot be mixed up together. 18.In support of his contention, the learned counsel placed reliance on the decision of the Division Bench of the High Court of Allahabad in the case of Chief Commissioner of Income-tax vs. Kisan Sahkari Chini Mills. Ltd., reported in [2005] 145 Taxman 363 (All.) and the decision of the Division Bench of the Bombay High Court in Devi Electronics (P.) Ltd., vs. Income-tax Officer 5(1) (3) reported in [2017] 77 taxmann.com 259 (Bombay). 19.Heard the learned counsels for the parties. 20.The short issue which falls for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee in the assessment year 2003-04 was entirely a new line of activity and the Board of Directors passed a resolution, memorandum of understanding was entered into and it is not a manufacturing activity, but a trading or a distribution activity. Therefore, we are of the considered view that the decision rendered by the Tribunal for the assessment year 2001-02 cannot render any assistance to the case of the assessee, more particularly when the substantial issue in the said year was whether power under Section 263 of the Act could have been invoked by the CIT(A). Therefore, the first contention raised by the learned counsel for the assessee stands rejected. 24.Next we move on to consider as to whether the finding rendered by the two authorities, viz., the Assessing Officer and the CIT(A), and the Tribunal, was just and proper. We find that the order passed by the Assessing Officer to be a reasoned order. Equally, we find the order passed by the CIT(A) was also a well reasoned order. Equally, the Tribunal also for its part, examined the factual position and rendered the finding. It is not in dispute that the assessee had stated th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ets and had earned interest, it cannot be said that it had engaged in any business. The principle laid down in the aforesaid that it had engaged in any business. The principle laid down in the aforesaid decisions would squarely apply to the facts of this case when it is seen that, during the accounting years relevant to the assessment years in question, the assessee had not made any advance at all or entered into hire-purchase transactions, but had merely been realising the outstandings. In view of the factual finding regarding the cessation of business of the assessee during the accounting years relevant to the assessment years in question, it follows that the Tribunal was quite right in concluding that the assessee had not carried on any business during the assessment years in question. 25.The Division Bench in P.V.Gajapathi Raju (supra) took note of the decision of the Hon'ble Supreme Court in CIT vs. Lahore Electric Supply Co. Ltd., reported in (1966) 60 ITR 1 (SC), wherein, the Hon'ble Supreme Court held that it would be laying down a strange law to hold that where a business, in fact, ceased to be run, it must be deemed as continuing because t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 2003-04, manufacturing activity did not commence and the assessee switched over to a new line of business, into trading. 29.In the decision in the case of L.VE.Vairavan Chettiar (supra), the Court found that there was nothing to show that the business had been abandoned and the assessee was continued to incur expenditure and it would come up and the business would be successful. In the said factual background, the Court held that the resultant loss being business loss is deductible. The three fact finding authorities have held that the entire business activity have come to a grounding halt. Subsequently, the conduct of the assessee also clearly reveals that the same line of business was never restarted. Therefore, we agree with the view expressed by the Tribunal that the assessee is not entitled for the benefit of set off of business loss which is in fact, business expenditure against the other income for all the three assessment years under consideration. 30.In Kisan Sahkari Chini Mills. Ltd. (supra), it has been held that Section 57 provides for deductions which are admissible from the income taxable under the head income from other source ..... X X X X Extracts X X X X X X X X Extracts X X X X
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