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TMI Blog2012 (11) TMI 711X X X X Extracts X X X X X X X X Extracts X X X X ..... 9,66,499/-, which was processed u/s 143(3) by the AO determining the income at Nil, making a disallowance of Rs. 49,66,499/- out of expenditure on administration. 3. The AO noted that the assessee had stated itself that there was no business activity during the year under consideration and that the receipt from trading activity during the year were 'Nil'. He noted that even then the assessee had claimed expenditure to the tune of Rs. 49,66,499/-. The AO observed that out of the administrative expenses of Rs. 49,66,499/-, an amount of Rs. 49,53,000/- had been shown as remuneration paid to the Director. He also noted that the remuneration paid to the Director was only Rs. 6,00,000/- for the immediately preceding AY i.e. AY 2006-07. Since the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TAT. He also cited the decision in the case of CIT Vs. New Savan Sugar and Guar Refinery Co. Ltd. (185 ITR 564), wherein even though the assessee had not carried on any business activity, but had derived income under the head 'other sources' from the lease of the factory it was held that in order to maintain establishment and comply with statutory obligations, expenditure incurred for earning such other sources income was deductible, even if such expenditure was unremunerative. The AR also referred to the decision in the case of CIT Vs. Rampur Timber and Turnery Co.Ltd., wherein miscellaneous expenses incurred for keeping the business alive and for profitable disposal of assets was held to be allowable u/s 57(3), even when the business was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hed that either the appellant was under obligation to pay such remuneration during the year or that the amounts in the name of remuneration were paid for any business purpose of the appellant company, even though it was admitted that it had no business/trading activities during the year. 6.1 As regards, the case laws relied upon by the representative of the appellant, it is clear that in those cases efforts to keep the company alive and to earn every possible income could be duly demonstrated. It was in the context of earning of such other income that the expenses were held allowable. No such nexus has been shown to exist in the present case. It is for this reason only that the Hon'ble ITAT had considered 50% of the administrative expenses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irector was already offered to tax by Shri Y.S. Chowdary and levying of tax on the same amount by making addition to the returned income of the assessee company would amount to double taxation of the same income which is against the principles of natural justice and it is also against the provisions of income tax Act. He pointed out that the director's remuneration was paid as per the resolution passed by the assessee company in its board meeting and the assessee through its AR had already furnished a copy of the Auditors report, annual report, confirmation for increase in share capital and share premium and other information as called for by the AO. The assessee relied upon the decisions in the case of CIT Vs. New Savan Sugar and Gaur Refi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e plain requirement of proper accounting and the interpretation of section 57(iii) cannot be different. The deduction of the expenditure cannot, in the circumstances, be held to be conditional upon the making or earning of the income." 12. It has been held in the case of CIT Vs. New Savan Sugar and Gur Refining Co. Ltd., (Cal) 185 ITR 565 even if a particular expenditure is un-remunerative, such expenditure is nonetheless is proper deduction, if such expenditure is made wholly and exclusively for the purpose of making or earning such income. 13. Taking into account the fact that i) remuneration received has been offered to tax by Shri YS Chowdary in the return filed by him in AY 2007-08 under the head income from salaries, ii) TDS ..... X X X X Extracts X X X X X X X X Extracts X X X X
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