Ita/164/2008 Of M/S.victoria Gold Gallery v. The Commissioner Of Income Tax

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE K.SURENDRA MOHAN TUESDAY, THE 24TH FEBRUARY 2009 / 5TH PHALGUNA 1930 ITA.No. 164 of 2008() --------------------- ITA.347/COCH//2005 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT/: -------------------- M/S.VICTORIA GOLD GALLERY,HARIKRISHNA, KAVU STREET,SEKHARIPURAM, PALAKKAD,REP. BY ITS PARTNERSHRI.K.B.PRASAD BY ADV. SRI.T.M.SREEDHARAN SRI.V.P.NARAYANAN RESPONDENT(S): --------------- THE COMMISSIONER OF INCOME TAX,TRICHUR. ADV. SRI.JOSE JOSEPH, SC FOR IT THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 24/02/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C.N.RAMACHANDRAN NAIR &K.SURENDRA MOHAN, JJ. ....................................................................I.T. Appeal No.164 of 2008 ....................................................................Dated this the 24th day of February, 2009. JUDGMENT Ramachandran Nair, J. Heard counsel for the appellant and Standing Counsel for therespondent. Appellant-assessee, a jeweller, started business atMettupalayam and in the course of time they opened two Branches, oneat Pollachi and another at Areacode. The initial expenditure forcommencement of business in the Branches and Head Office wasspread over to be adjusted against income of the ten succeeding years.In other words, the eligible expenditure was to be amortized in tenequal instalments. Even though the Assessing Officer alloweddeduction in terms of the claim during the previous year relevant for2003-2004, the assessee closed one Branch and claimed the entireunabsorbed expenditure spent for setting up of that Branch in that year.When this was disallowed, matter was taken up in appeal to theTribunal and the Tribunal held that along with the expenditure carriedover for the Head Office and the other Branch, the remaining unabsorbed expenditure for the closed Branch also should be spreadover equally to be allowed in succeeding years. It is against this orderappeal is filed. 2. Counsel for the appellant submitted that when the Branch isclosed, the unabsorbed expenditure carried over should be allowed inthe year of closure. Standing Counsel opposed this stating thatTribunal's order is to allow expenditure in terms of the accountingpractice followed by the assessee. We are unable to accept the claimof the assessee because there is no provision in the Act to claim theentire expenditure incurred for setting up of a Branch in the year ofclosure of the Branch. In fact, assessee rightly followed the system ofwriting off the expenditure in a phased manner and we see no reasonwhy closure of one Branch should interfere with the practice followedby the assessee and accepted by the department. So long as businesscontinues, the balance unabsorbed expenditure of the closed Branchalso should be apportioned equally for the remaining years along withcarried forward liability of the Head Office and the other Branch. We, therefore, uphold the order of the Tribunal passed in the above lines.The appeal is consequently dismissed. C.N.RAMACHANDRAN NAIRJudge pms K.SURENDRA MOHANJudge