Expenses incurred for Business allowable as a Income Tax Deduction until the Liquidation of Firm: ITAT

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Expenses incurred for Business allowable as a Income Tax Deduction until the Liquidation of Firm: ITAT

 

Annapurna Polymers Pvt. Ltd. vs. DCIT (I.T.ANo.2606/Ahd/2016 A.Y. 2012-2013)

Facts:

  1. The ld. CIT(A) noted that assessee company was in voluntary liquidation by resolution passed in its general meeting dated 25.03.2014. Accordingly, he held that the case of the assessee was squarely covered by the decision of Hon’ble Apex Court in the Vijaylaxmi Sugar Mills Ltd. Vs. CIT [1991] 191 ITR 641 wherein it had been categorically held that expenses incurred when the assessee was in liquidation had nothing to do with the business of the assessee. The assesse could not be said to be carrying on any business and therefore the expenses in relation to municipal taxes and security charges were not allowable.
  1. The appellant has submitted that the Company is still continuing in its own name and the name of the company is not struck off from the Register of Companies. In this regard various judgments are cited by the appellant where in it is held that even in a case where the company does not carry on any business activity and it has only income from other sources, expenses incurred to maintain the status of a company are allowable.

ITAT Ahmedabad held as below:

  1. The findings of CIT(A) is based on the fact noted by him that the assessee company went into voluntary liquidation vide Board resolution passed on 25-03-2014. The impugned year before us is A.Y 2012-13. Clearly as per the facts noted by the Ld.CIT(A) the assessee company was not into liquidation in the impugned year but in later year. Therefore the proposition and logic applied miserably fails on facts.
  1. The Profit and Loss account show Revenue from Operations earned during the impugned year of Rs. 17,23,77,975/- which includes sale of products alone of Rs.16,61,87,101/- and other operating Revenue. The statement also reflects expenses claimed against the said Revenue totaling in all Rs.15,98,83,984/- including material cost of Rs.14.94 crores and employee, finance and depreciation cost also. Thus the facts before us demonstrate that the assessee was carrying on business during the year.
  1. So expenses in relation to municipal taxes and security charges are allowed.

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