2024 (12) TMI 34 - AT - Income Tax

Disallowance u/s 37 - Allowability of business expenses - CIT(A) deleted addition - HELD THAT - Section 37 of the Act provides that any expenditure not being in the nature of capital expenditure or personal expenses of the assessee laid out or expanded wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head Profits and gains of business or profession . The assessee wholly and exclusively claims that the entire expenses have been incurred for the business purposes. The assessee company has paid tax at MAT rate and there is no tax evasion. The Ld CIT(A) has examined this issue in correct prospective and rightly deleted the additions towards disallowances of business, expenditure u/s 37 of the Act made by the AO. Reasonings and findings of the Ld CIT(A), while granting relief is on proper appreciation of law expounded by the judicial dicta. We do not find any reasons to interfere with the findings of the Ld CIT(A). The appeal of the revenue is liable to be dismissed.

Summary

Issues:
1. Disallowance of business expenses under section 37 of the Income Tax Act, 1961.
2. Justification for deletion of the addition of Rs. 2,70,64,096/- by the CIT(A).
3. Interpretation of Section 37 of the Act regarding business expenses.

The judgment pertains to an appeal by the revenue against the order of the Commissioner of Income Tax (Appeals) regarding the disallowance of business expenses under section 37 of the Income Tax Act, 1961 for the assessment year 2014-15. The revenue raised grounds questioning the deletion of an addition of Rs. 2,70,64,096/- by the CIT(A). The case involved an assessee company engaged in various businesses, including Shipping Commission, Financing, and Wind Energy. The Assessing Officer (AO) assessed the gross income of the company, leading to the dispute. The CIT(A) allowed the appeal filed by the company, prompting the revenue's appeal before the tribunal.

During the proceedings, the Departmental Representative (DR) argued that the company received dividend income taxable under section 115BBD of the Act, while the Authorized Representative (AR) of the company contended that the disallowance was based on suspicion and conjecture by the AO. The AR cited various judgments to support the company's case. The tribunal heard both parties and examined the material on record.

The CIT(A) relied on multiple judgments and deleted the addition made by the AO, emphasizing that disallowance based on the quantum of business income was unwarranted, especially when expenses claimed were consistent with prior years. The CIT(A) highlighted that expenses should be incurred wholly and exclusively for business purposes as per Section 37 of the Act. The tribunal found the CIT(A)'s reasoning and findings to be in line with legal principles and decided to dismiss the revenue's appeal.

In conclusion, the tribunal upheld the CIT(A)'s decision to delete the disallowance of business expenses under Section 37 of the Act, emphasizing that the expenses were incurred for business purposes. The judgment provided a detailed analysis of the legal provisions and case law to support the decision. The appeal of the revenue was ultimately dismissed by the tribunal.