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TMI Blog1984 (12) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... gistered office and the establishment. The partners had gone abroad also for exploring the possibilities for export market there. During these three years, funds were invested in fixed deposits and interest was earned, which was returned by the assessee. During these years, the assessee filed loss returns. The ITO after disallowing a sum Rs. 5,000 in the year 1978-79, Rs. 4,000 in 1979-80 and Rs. 6,000 in 1980-81, out of the expenses claimed, determined the net loss at Rs. 91,110, Rs. 38,960 and Rs. 54,902 for the assessment years 1978-79, 1979-80 and 1980-81, respectively. The assessee had filed applications in Form No. 12 for continuance of registration. The ITO granted continuance of registration in all these three years. 3. The Commissioner issued notice under section 263, seeking to revise the assessment orders and the continuation of registration in response to which the assessee filed explanation objecting to the proceedings under section 263. It was urged before him that in view of the adverse market conditions in world market and also since the assessee was not a successful bidder, the assessee could not purchase or sell the coffee but efforts had been made to do busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the business. Further, the Commissioner has directed the ITO to apply the provisions of section 183(b), which also indicates that the assessee would be treated as a registered firm and there is no prejudice to the interests of the revenue. He urged that the order of the Commissioner should be cancelled. The learned departmental representative supported the order of the Commissioner. He urged that as the assessee did not export coffee during these years, no business has been carried on and as such the expenses claimed cannot be allowed. On that account registration also cannot be granted. Thus, he supported the order of the Commissioner. 5. We have considered the rival submissions. The assessee is a registered exporter of coffee from 1974 and continues to be so even now. In the earlier years, the assessee exported coffee to foreign countries. During these years, the assessee participated in the bid held by the Coffee Board but was not a successful bidder. Coffee can be purchased only if he is a successful bidder at the auction held by the Coffee Board. Since, he was not a successful bidder, he could not purchase and export the coffee during these years. The assessee maintaine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or a small quantity of 25.5 tonnes in January 1976 and 7.5 tonnes on 4-7-1984. It is clear from the facts that the assessee exported coffee in the earlier years. During these three years, i.e., 1978-79, 1979-80 and 1980-81, the assessee participated in the auction but was a unsuccessful bidder. During these three years, there was lull and inactivity in the business of the assessee. It did some business again in 1984, having purchased 7.5 tonnes of coffee in auction held on 4-7-1984. The assessee maintained its establishment. The partners went abroad for exploring the export market. Thus, the assessee was very much in the business though no export of coffee took place in these three years. It cannot be said that the assessee has stopped the business. All that can be said is that there was lull and inactivity in the assessee's business during these three years. Merely because there was lull and inactivity it cannot be held that the business has ceased to exist. We are unable to agree with the findings of the Commissioner that the assessee had no intention to carry on the business nor carried on the business. He was wrong in holding that the assessee is not entitled to the deduction o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... waiting for improved market conditions in arecanuts and there was nothing to show that he completely abandoned or closed the business for ever, the business must be deemed to be continuing and, hence, the disallowance of the amount of loss claimed was not valid in law. The same view has been taken by the Madras High Court in Mrs. Sarojini Rajah v. CIT [1969] 71 ITR 504, where also a long interval between 1948-49 and 1953-54 existed during which there were no transactions in shares by the assessee. In Karsondas Ranchhoddass v. CIT [1972] 83 ITR 1, the Bombay High Court held that the period of inactivity is not conclusive in deciding whether a person is or is not doing business. In that case, business was carried on up to 1947-48 and there was no business between 1948-49 to 1953-54. Thereafter, again there was some business. On those facts, it was held that it is impossible to infer from the interregnum between 1948-49 and 1953-54 that the assessee has ceased to do business in shares and during the period of inactivity also its intention to do business did not cease. In General Corpn. Ltd. v. CIT [1935] 3 ITR 350 (Mad.) the assessee claimed deduction of a sum of Rs. 5,420 being expe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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