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TMI Blog2022 (1) TMI 482X X X X Extracts X X X X X X X X Extracts X X X X ..... ong as it is in operation, it has to maintain the status as a company and it has to discharge certain legal obligations and for that purpose it is necessary to appoint clerical staff and secretary or accountant and incur incidental expenses. In this background, the conclusion of the Tribunal that the expenses incurred were wholly and exclusively for the activities to earn income is pre-eminently a reasonable conclusion. We have considered a similar case in New Savan Sugar Gur Refining Co. Ltd.[ 1969 (2) TMI 7 - SUPREME COURT] Genuineness of the expenditure is not in dispute and the Company in subsequent assessment years has shown income from operations, we set aside the order of the Ld. CIT(A) and direct the A.O. to delete the addition. - Decided in favour of assessee. - ITA No.4776/Del./2018 - - - Dated:- 6-1-2022 - Shri R.K. Panda, Accountant Member And Shri K. Narasimha Chary, Judicial Member For the Assessee : Shri Madhur Agarwal, Advocate For the Revenue : Shri Anil Gandhi , Sr. DR. ORDER PER R.K. PANDA, A.M. This appeal by the Assessee is directed against the order dated 14.05.2017 of the Ld. CIT(A)-16, New Delhi, relating to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cepted that they are trying to revive their business buy still the expenses/expenditure claimed did not appear to have any nexus with the income earned. Thus it appears that these expenses are basically claimed to reduce the profitability because to earn income from the bank deposits and rental income. One need not require to incur huge legal and professional fees and entertain expenses and other such expenses. Thus the assessee claim the they require the services of several staff members and also required administrative and other infrastructure for earning income, which in the instant year is mainly from the income from other sources does not appears to be convincing. According as the assessee has failed to establish the nexus of the expenditure incurred with the income shown 50% of the expenses claimed on account of employees benefit expenses of ₹ 25,80,244/- and other expenses claimed of ₹ 43,08,171/- i.e. totaling to ₹ 34,44,207/- are hereby disallowed and added back to the income of the assessee. In appeal a Ld. AR submitted that the justification of expenses has already been filed before AO. Ld. AR furnished the nature of expenses incurred, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in order to support the fact that no addition was called for in the instant case. 1.2. That the learned Commissioner of Income Tax (Appeals) has further failed to appreciate the fact that the disallowance to the tune of ₹ 34,44,207/- has been made on estimated and ad-hoc basis @ 50% of various expenses, which is impermissible in law and on this ground alone, the disallowance deserved to be deleted. 1.3. That the learned Commissioner of Income Tax (Appeals) has further gone wrong that there is no nexus between the expenditure incurred and the income shown, such finding is factually incorrect and contrary to material available on record . 4. Learned Counsel for the Assessee strongly challenged the order of the Ld. CIT(A) in sustaining the disallowance of 50% of the employees benefit expenses and other expenses. Referring to the decision of Coordinate Bench of the Tribunal in the case of ACIT vs., Ganapati Enterprises reported in 142 ITD 158 (Del.), he submitted that the Tribunal in the said decision has held that where the A.O. failed to give details of expenses which were found unverifiable and made an adhoc disallowance, the said disallowance was to be de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Other Income (in Rs) Status of Assessment u/s 143(3) or 143(1) 2010-11 - 5,07,993 45,00,000 31.03.047 No disallowance made in assessment u/s 143(1) 2011-12 - 5.70,495 3,75.000 34,10,261 No disallowance made in assessment u/s 143(1) 2012-13 - 3,38,639 - 32,01,308 No disallowance made in assessment u/s 143(1) 2013-14 2,14,503 2,58,488 - 1,02,82,1 1.356 No disallowance made u/s 143(3) on account of Adhoc Expenses 2014-15 25,80,244 43,08,171 1,25,000 6,11,38,102 Impugned Appeal 2015-16 25,84,741 34,65,651 3,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn. It is his submission that the expenses incurred by a Company even when it does not carry on any business activity has to be allowed as deduction since it has to maintain establishment for complying with the statutory obligations unless its name is struck-off by the Registrar of Companies or it is dissolved. 6.1. We find merit in the above arguments of the Learned Counsel for the Assessee. We find an identical issue had come-up before the Hon ble Calcutta High Court in the case of CIT vs., Ganga Properties (supra). In that case also the ITO disallowed certain expenses claimed by the assessee while computing income from other sources. On appeal, the Assistant Commissioner allowed further expenses, but, sustained certain additions made by the A.O. On further appeal by the assessee, the Tribunal was of the view that the assessee being a Company had to appoint a Secretary and an Accountant to meet all the requirements under the Companies Act and Labour Law and an office has to be maintained. It was accordingly held by the Tribunal that all the expenditure claimed by the assessee can be said to be wholly and exclusively required for its business activities to earn income. Accord ..... X X X X Extracts X X X X X X X X Extracts X X X X
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