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August 27, 2022

Business expenses incurred are allowable irrespective of income from such expenses

by CA Shivam Jaiswal in Income Tax, Legal Court Judgement

Business expenses incurred are allowable irrespective of income from such expenses

Facts and Issues of the case

The assessee filed its return of income on showing the total income of Rs.2, 16, 45,540/-. The case was selected for scrutiny and the notice u/s 143(2) of the I.T Act was issued and served. In response to notice u/s 143(2) of the I.T Act, the Authorized Representatives of the assessee company attended the assessment proceedings and furnished the detail called for.

The assessment order came to be passed by disallowing the expenses of Rs. 3,60,09,520/- claimed by the assessee under the business expenses and passed assessment order by assessing the total income of the assessee at Rs.5,75,55,060/- as against the returned income of Rs.2,16,45,540/-.

Observations by the Court

The Court has heard both the sides, considered the material on record.  The CIT (A) while deleting the addition found that, the assessee has shown the business income in the subsequent year i.e.  2011-12 & 2012-13 and the A.O has allowed the expenses against the business income shown under the head   of consultancy and electricity and generator expenses. Further found that, the   Assessing Officer has not given any finding and without appreciating the accounts filed by the appellant disallowed the expenses against the business income shown by the assessee.

The issue of quantum of income and allowableness of the expenses it has to be seen that, whether the expenditure incurred wholly and exclusively for the purpose of business or not. So long as the expenses are incurred for the purpose of business,  in  our  opinion  the  same  should  be  allowable  as deduction and it is not necessary that the expenditure may result in income or there must be substantial income.  In view of the above discussion, we do not find any error or infirmity in the order of CIT (A).

Conclusion

It is not necessary that the business expenditure may result in income or there must be substantial income. Such expenses which are incurred for the purpose of business should  be  allowed as deduction.

ACIT-Vs-Emcipi-Electronics-Pvt.-Ltd.-ITAT-Delhi

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