COMMISSIONER OF INCOME TAX Vs. ANITA JAIN

JUDGEMENT

(1.) THESE three appeals have been filed by the CIT(A), Delhi -XI under s. 260A of the IT Act, 1961 ('IT Act' for short), for the asst. yrs. 1999 -2000, 2000 -01 and 2001 -02. With regard to the assessee's claim for expenses for asst. yr. 1999 -2000, 75 per cent thereof had been disallowed primarily on the ground that although the assessee was doing export business upto the year 1998, business had closed down in the three subject assessment years. The assessee had disclosed that over a period of 14 years foreign exchange to the tune of Rs. 61.07 crores had been earned which entitled the assessee to past performance quota (PPQ) on which there was a earning of Rs. 1,05,716 for its transfer which was duly offered for taxation. It had also been brought out that for asst. yrs. 2002 -03, 2003 -04 and 2004 -05 a large turnover could be achieved only on account of continued business.

(2.) THE Tribunal has concluded on facts that the assessee was maintaining her office, retaining staff and was engaged in the business of export and, therefore, it was not a case where she had closed down the business. The Tribunal was of business had been closed down and that the sale of PPQ was very much a business activity. Similarly, selling of stock could not lead to this inference. The Tribunal has also noted that the expenditure in these years has substantially reduced since there was a lull in the business. Rather than a closure of business, the Tribunal was of the opinion that it was a case of dormancy of business activity. Furthermore, the Tribunal noted that allowance of 25 per cent of the expenses, as well as allowance of depreciation, is indicative only of continued business.

(3.) MS . Bansal, learned counsel for the Revenue, has drawn our attention to the observation in CIT vs. Lahore Electric Supply Co. Ltd. (1966) 60 ITR 1 (SC) to the effect that the 'mere fact that the company had not gone into liquidation would not establish that it had the intention to do business'. This submission loses sight of the observations made at p. 5 which clearly indicate that the Court came to the conclusion that the assessee had closed business because it had not 'established an intention to resume it'. Such is not the circumstance obtaining in the present case. This case has been applied in CIT vs. Vellore Electric Corporation Ltd. (2000) 243 ITR 529 (Mad) where it has been pithily noted that maintenance and establishment is the indication of intention to resume business. In Karsondas Ranchhoddass vs. CIT (1972) 83 ITR 1 (Bom) it was noted that there were two periods of activity before and after the interregnum or period of inactivity which was indicative that the business was nevertheless continued. We are in complete agreement with the view taken by the Tribunal that the present case is an example of a lull in business and not cessation in business. Therefore, no substantial question of law arises for consideration.