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TMI Blog2017 (8) TMI 1696X X X X Extracts X X X X X X X X Extracts X X X X ..... of lull and inactivity it is kept alive and if it retains its registered office and holds meetings. 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. The mere fact that a businessman has not been able to obtain a contract and the business has for some time been in that sense dormant would not mean that it has ceased to exist, if the assessee continues to maintain an establishment and incur expenses in the expectation that work would come and the business would be successful - Thus we find that the disallowance made by him is not based on any material or reasons. 2nd ground of appeal is dismissed. Addition made of account of interest - as per TDS certificate the interest income pertained to A.Y. 2009-10 - HELD THAT:- We find that interest of Rs.20,80,817/- out of Rs.26,90,478/- on account of interest received from Patel Engineering Ltd. was offered to tax in the AY 2008-09. Also M/s Patel Engineering Ltd. was given the interest, net of TDS, of Rs.20,80,817/- on 03.10.2007 vide cheque no. 143318. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of interest from Rs.29,37,825/- to Rs.6,09,665/- without considering the fact that as per TDS certificate the interest income pertained to A.Y. 2009-10. 4. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance u/s 40(a)(ia) on the basis of the submissions made by the assessee at the time of appellate proceedings without giving an opportunity of the assessing officer for verification of the same. 3. We begin with the 1st ground of appeal. The Assessing Officer (AO) noticed that in the profit and loss account the assessee had credited interest income of Rs.35,47,231/-. The AO noted that the assessee did not carry out any business activity during the relevant previous year. The assessee also failed to bring any evidence on record to show that it was a registered non-banking finance company engaged in the business of financing. Therefore, the assessee treated the interest income as income from other sources. 3.1 Aggrieved by the order of the AO, the assessee filed an appeal before the Ld. CIT(A). The Ld. CIT(A) held that (i) as per the Memorandum of Association, the assessee is permitted to carry on numerous objects of whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed the above expenditure of Rs.12,49,965/- debited to the profit and loss account. 4.1 In appeal, the Ld. CIT(A) has followed the decision in the case of CIT vs. Eastman Industries 327 ITR 29 (P H) wherein it is held that what has to be looked into is the substance of the activities carried on by the assessee. Out of expenses of Rs.12,49,965/-, the assessee has accepted expenses of Rs.3,95,000/- as capital expenditure. The assessee had claimed deduction of revenue expenses of Rs.8,54,965/- (Rs.12,49,965 Rs.3,95,000). Considering the facts of the case, the Ld. CIT(A) thus deleted the disallowance of Rs.8,54,965/- made by the AO. 4.2 Before us, the Ld. DR submits that the assessee was not registered as a NBFC during the relevant period and the AO has rightly made a disallowance of Rs.8,54,965/-. 4.3 On the other hand, the Ld. Counsel of the assessee supports the order passed by the Ld. CIT(A). 4.4 We have heard the rival submissions and perused the relevant materials on record. A company may not obtain, or 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disputed by the Ld. AO that M/s Patel Engineering Ltd. has given the interest [Net off TDS] of Rs.20,80,817/- on 03.10.2007 vide cheque no. 143318. It is also an equally settled position of law that levy of interest u/s 201(1A) of the Act does not determine the year of taxability of the interest income in the hands of the recipient. Accordingly, the AO is directed to delete the addition to the extent of Rs.20,80,817/- out of Rs.26,90,478/- as such amount has been already taxed in AY 2008-09. The balance amount of Rs.6,09,661/- being the amount of TDS deposited by the payer namely Patel Engineering Ltd. during AY 2009-10 be taxable as income in AY 2009-10 and hence to that extent the addition is sustained. 5.2 Before us, the Ld. DR supports the order of the AO whereas the Ld. Counsel of the assessee relies on the order passed by the Ld. CIT(A). 5.3 We have heard the rival submissions and perused the relevant materials on record. We find that interest of Rs.20,80,817/- out of Rs.26,90,478/- on account of interest received from Patel Engineering Ltd. was offered to tax in the AY 2008-09. Also M/s Patel Engineering Ltd. was given the interest, net of TDS, of Rs.20,80,817/- on 0 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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