The Income Tax Appellate Tribunal ( ITAT ) has held that, Expenditure resulting in income or substantial income not necessary for granting deduction for business purposes.
The assessee, M/s. Emcipi Electronics Pvt. Ltd filed its return of income on 26.09.2010 showing the total income of Rs.2,16,45,540/-. The case was selected for scrutiny and the notice u/s 143(2) of the IT Act was issued and served on 23.09.2011. In response to notice u/s 143(2) of the IT Act, the Authorized Representatives of the assessee company attended the assessment proceedings and furnished the detail called for. The assessment order came to be passed on 28/01/2013 by disallowing the expenses of Rs. 3,60,09,520/- claimed by the assessee under the business expenses and passed assessment order by assessing the total income of the assessee at Rs.5,75,55,060/- as against the returned income of Rs.2,16,45,540/-.
Aggrieved by the assessment order dated 28/01/2013, the assessee has challenged the same before the CIT(A). The CIT(A), confirmed the addition to the extent of Rs. 82,75,866.20/- made by the A.O and allowed the expense claimed by the assessee as against the business income at Rs. 1,83,85,198/, accordingly, partly allowed the Appeal on 11/02/2019. The Department of Revenue aggrieved by the order dated 11/02/2019, filed the present Appeal before the Tribunal.
The Bench consisting of B R R Kumar, Accountant Member and Yogesh Kumar U S, Judicial Member held that “The issue of quantum of income and allowableness of the expenses it has to be seen that, whether the expenditure incurred wholly and exclusively for the purpose of business or not. So long as the expenses are incurred for the purpose of business, in our opinion the same should be allowable as deduction and it is not necessary that the expenditure may result in income or there must be substantial income. The said view has been supported by the decision of Hon’ble Supreme Court in the case of CIT Vs. Malyalam Plantation Ltd. and CIT Vs. Rajinder Pd. Moodi.”
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