9911796707
TMI Blog2011 (1) TMI 1573X X X X Extracts X X X X X X X X Extracts X X X X ..... he addition of Rs.23,27,741/- claimed to have been incurred for business purposes to be deductible from rental income though deduction u/s.24(a) has been allowed and no business activities were carried out during the year." 3. The assessee is a company having the business of property developer and share traders. It also earns income from letting out of properties. In the computation of income assessee reflected the following income:- a. Income from rent Rs.35,38,360/- b. Other income(Sch-K) Rs. 86,667/- 3.1 Against the above the assessee claimed following expenses:- a. Purchase of shares Rs. NIL b. Salary, allowances etc. Rs.2,95,230 c. depreciation for the year(Sch-D) Rs.2,95,230 d. Auditors' remuneration: Statutory Aud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... activity of the assessee and hence should be fully allowance under the income Tax Act, 1961 4.4 We further submit that it is true that no income was generated from the business, activity of the assessee during the relevant assessment year. However this can not be a valid reason for disallowing the, above legitimate expenses incurred and such other fixed expenses incurred viz, salary of staff and other ongoing business expenses. All such expenses thus, incurred for protecting the business interests of the assessee company should hence be fully allowable under the Income Tax Act, 1961. 4.5 In this context we would like to draw your kind attention to the decision of Hon'ble Rajasthan High Court in CIT vs. Udaipur Mineral Development Syndi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er." (iii) Assessee has stated that its main activity is construction of flats and sale of land. (iv) Assessee has also stated that the expense of Rs23,27,741/- are related to its activity of trading in land and property. (v) It is found from the Balance Sheet that the head "stock in trade of landed properties" amounts to Rs 2,50,55,374/- and under the debtors, assessee has shown advance from flats and land as detailed in schedule-I (vi) Notes to the accounts given by the Auditors say "The company does not have any stock of raw materials and/or finished goods." (vii) Notes to the accounts under point 1.06 states "all expenses for development and completion of project are charged to work in progress account maintained projectwise a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the year under consideration has been allowed by the A.O. and no disallowance has been made therefrom. 8. The ld.CIT(A) opined that it is not the case of the revenue that the assessee has discontinued or closed down its other business activities. He noted that in the balance sheet 'stock-in-trade of landed properties' was disclosed at Rs.2,50,55,374/-. This would so that the business of the assessee has not been discontinued. Certain expenses are required to be incurred to keep a company going and to maintain its health whether any business activity was carried out or not during a particular FY. Such expenses are to be allowed as expenditure irrespective of the fact that during a particular year no business transaction was carried out b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y him that no details of such expenses have been furnished by the assessee. It was further pointed out by him, referring to the departmental paper book page-7, that advance received against booking of flat under construction and advance received against sale of land, EMBP has not been shown as receipts. Thus, expenses relatable to the same has to be capitalized as work in progress. Referring to departmental paper book page15- it was pointed out by him that the land valued at Rs.25,055,374/- has been shown as stock in trade as on 31-03- 2005. He further pointed out that from departmental paper book page-17, it is clear that Rs.2,11,080/- as lease rental expenses was relatable to the property, which was rented out. Similarly, it is pointed ou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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