Expenditure related to Earning of Income from Other Sources only is Allowable u/s 57(iii): ITAT [Read Order]

Preliminary Expenditure ITAT -Taxscan

A single bench of Sunil Kumar Yadav (Judicial Member) recently confirmed that expenditure strictly related to earning of Income from other sources is to be allowed under Section 57(iii) of the Income Tax Act, 1961.

In the instant case, the assessee preferred an appeal before the CIT (Appeals) with the submission that to maintain corporate structure, the assessee is required to incur certain expenses which should be allowed against other income of the assessee. The CIT (Appeals) re-examined the issue in the light of the assessee’s contentions, but was not convinced with it and dismissed the appeal of the assessee.

While considering the second appeal, the Tribunal bench found that during the search proceedings it was revealed that the assessee companies were claiming bogus business losses without having any business and also noticed that business loss was claimed to be set off against income from house property and interest income.

The tribunal bench raised query that when the assessee has started its business. In response thereto, it was stated that assessee is contemplating to restart it, meaning thereby, the assessee has never undertaken any business of trading. Based on this fact bench opinioned that the expenditure relating to keep corporate entity alive cannot be allowed as there was no intention of assessee to run a business.

Finally ITAT confirmed the order of CIT (A) and declared that under section 57(iii) of the Act, only those expenditure are to be allowed which are related to earning of income from other sources. Since the expenditure claimed by the assessee was not incurred to earn income from other sources, the same cannot be allowed.

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