Case Law Details
Devkripa Textile Mills (P) Ltd. Vs ACIT (ITAT Jodhpur)
Briefly the facts of the case are that the assessee company is engaged in manufacturing of synthetic fabrics on job work basis for other parties. It is also engaged in trading of synthetic fabrics during the year. It filed its e-return on 27.10.2015 declaring total loss of Rs. 1,57,07,558/-. The return was processed u/s 143(1) on 26.02.2016 at the declared income. The case was selected for complete scrutiny under CASS. Notice u/s 143(2) of the Income Tax Act, 1961 was issued on 12.04.2016 duly served upon the assessee on 20.04.2016, fixing the case for hearing on 22.04.2016. Subsequently, notice u/s 142(1) of the Act with query letter dated 06.07.2017 was issued fixing the case for hearing on 20.07.2017. In compliance to notices issued to the assessee company attended from time to time and furnished required details/ information which were placed on record. During assessment proceedings books of accounts were produced which were examined on test-check basis. The facts of the case were discussed with the A/R of the assessee company by the AO.
The assessing officer noticed that the business of the assessee has been carried on up to July, 2014 only. However, the assessee has paid remuneration of Rs.5,10,000/- to the directors for the whole year. The assessee had also claimed depreciation for full year. Since the business operations have been stopped in July, 2014, the AO took the view that the above said directors’ remuneration and depreciation cannot be allowed for whole of the year. Accordingly, he restricted the salary expenses to Rs.2,24,000/- and disallowed balance amount of Rs.2,86,000/-. Since the assets were put to use for less than 180 days only, the AO disallowed 50% of depreciation claimed by the assessee.
The Ld A.R submitted that the assessee has not completely stopped the business and there was only suspension of business for a temporary period. He submitted that the business has been revived in the succeeding year. Accordingly, he submitted that the tax authorities are not justified in making disallowances out of director’s remuneration; out of depreciation and out of other expenses. The ld. AR for the assessee strongly relied upon the two judgment to support his case which reads as under:-
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