Internet Expenses, Labour Charges as Allowable Business Expenses: ITAT [Read Order]

The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) has allowed the appeal of a company, Icenet Net Ltd., and held that the internet expenses and labour charges incurred by the company were allowable business expenses.

The assessee, Icenet Net Ltd is an internet service provider. The assessee claimed two expenses in the assessment year 2017-18: Rs. 10,00,000/- for internet expenses and Rs. 2,00,000/- for labour charges. Under Section 69C r.w.s. 115BBE of the Income Tax Act, 1961, the Assessing Officer (AO) rejected these costs as unexplained expenditure. The assessee filed an appeal against the AO's decision.

The assessee argued that the internet expenditures were incurred as a result of the Department of Telecommunications invoking a performance guarantee and the labor expenditures were incurred for administrative and accounting works required to maintain the company's corporate status and also the costs incurred in the course of business were required for the company's corporate status to be maintained as a result the provisions of Section 115BBE did not apply.

AO argued that the internet charges, were not incurred in the course of business and the labor expenses were not required for the company's corporate status to be maintained and the costs went unaccounted for and should have been taxed at a higher rate under Section 115BBE of Income Tax Act.

The Tribunal observed that the internet expenses were incurred in the course of business and that the labour charges were necessary for the maintenance of the corporate status of the company. The authority also found that the provisions of Section 115BBE of Income Tax Act were not applicable in this case.

A Single member bench, comprising of Suchitra Kamble (Judicial Member), carefully considered the arguments presented by both parties and examined the evidence on record. As a result, the bench granted the appeal filed by the assessee, nullified the Assessing Officer's order, and granted the relief sought by the assessee.

To Read the full text of the Order CLICK HERE

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