The Pune Bench of Income Tax Appellate Tribunal ( ITAT ) has held that income of hire charges can’t be earned without incurring expenditure and disallowance of whole expenditure will not sustainable.
The appellant derived income from hire charges of JCB Machines which filed a return of income declaring a total income of Rs.2,65,050/-. The Assessing Officer passed order u/s 143(3) of the Income Tax Act, 1961 declared a total income of Rs.7,90,150/- after making disallowance of Rs.5,25,100/- on account of salary and machinery maintenance expenses and disallowed the same by stating that the rental income was shown not under the head “business” but shown under the head “other sources”.
CIT(A) confirmed the addition on the ground that the appellant had not furnished the details of salaries and machinery maintenance expenses, not produced vouchers in respect of such expenditure or the mode of payments and also failed to prove that such expenditure was incurred wholly and exclusively to earn income offered to tax under the head “income from other sources”.
The appellant contended that there was no requirement under law to maintain the books of accounts when the turnover of the assessee does not exceed the prescribed limit and stated that no income can be earned under the head “other sources” without incurring any expenditure. Further contended that the expenditure under the head’s salaries and fuel expenses as claimed are incurred wholly and exclusively in connection with JCB hire charges
It was viewed by the Tribunal that the hire charges from JCB can be earned without incurring any expenditure on salaries and fuel expenses etc and merely because the appellant failed to produce the evidence does not lead to conclude that the appellant had not incurred any expenditure to earn such income.
The Tribunal comprising Shri Inturi Rama Rao, AM & Shri S S Viswanethra Ravi, JM observed that the lower authorities as unreasonable and directed to delete the disallowance of Rs.5,25,100/- The appeal filed by the assessee was allowed. Shri K Srinivasan appeared for the assessee and Shri Arvind Desai appeared for the revenue.
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