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1.   Assistant Commissioner of Income Tax Vs. East India Pharmaceuticals Ltd., ITA No. 770 (Kol.) of 2012, Date of Pronouncement 22.11.2013, ITAT-Kolkata

Issue I – Whether foreign travel expenses incurred by the director of the assessee company for exploring the prospects of export of the assessee’s products abroad is allowable business expenditure even if the director incurred such expenditure in the capacity of President of Indian Chemical Council?

Held: Yes

“As the assessee is engaged in the business of pharmaceuticals, the association of the director with the Chemical council cannot be said to be alien to the business. Further, the ld. CIT(Appeals) has recorded a categorical finding that Shri Dipankar Dutta Gupta also explored the prospects of export of the assessee’s products abroad. This finding has not been controverted by ld. D.R. with any material worth the name. It is observed that Shri Dipankar Dutta Gupta undertook the foreign tour, albeit as President of the Indian Chemical Council, but was representing the Company in his capacity as director. The further fact that he explored the prospects of export of assessee’s products abroad clearly points out that it was a purely commercial and business tour. In our considered opinion, no exception can be found to the view canvassed by the first appeal late authority in deleting this addition.

Issue II – Whether direct expenses and depreciation of a temporarily suspended unit of the company will be allowed u/s 37(1) & 32 of the Income Tax Act?

Held: Yes

“If there is a composite business, there can be no denial of deduction in respect of expenses of one unit which is not operating, when there is unity of control of both the units. Adverting to the facts of the instant case, we find that the Durgapur Unit was very much part and parcel of the assessee-company. In our considered opinion, the expenses in respect of such a temporarily closed business can not be disallowed. In so far as the quest ion of depreciation in respect of the assets of Durgapur unit is concerned, we find that there is a plethora of judgments allowing depreciation on the passive user of assets”.

(Please click here for judgment)

2.  Onassis Axles Private Limited Vs CIT, ITA No. 31/2013, Date of order: 13.02.2014, High court Delhi

Issue: Whether addition u/s 68 can be made on account of the share applicants’ lack of resources, and the woefully inadequate share capital?

Held: Yes

“Lovely Exports Pvt. Ltd. (supra) is an authority for the proposition that the assessee is under an obligation to dispel any doubts regarding the genuineness of an investor and the genuineness of the transaction. Here, though the assessee furnished particulars relating to three share applicants, the further inquiry made by the AO raised more questions than answers. The share applicants’ lack of resources, the assessee’s position vis-à-vis share amounts received and its commercial condition all pointed to the amount received by it falling within the mischief of Section 68 as unexplained amounts”.

(Please click here for judgment)