The Kolkata Bench of Income Tax Appellate Tribunal (ITAT) has disallowed the expenses holding that property which was not used for business purposes could not be treated as business assets.
The assessee Dream Buildcon Pvt. Limited, had purchased a property which was ultimately sold in F.Y. 2009-10 for a total sale consideration of Rs.15 crores. Thereafter a new property at the same place was purchased in the same year, i.e. 2009-10 for an amount of Rs.25.44 crores by utilising the entire sale consideration and refund of loans and advances. On this property, the assessee has incurred Watch & Ward Expenses and Electricity Expenses.
According to the assessee, this property was used for business purposes as the office of the assessee. The Revenue Authorities recorded a finding that neither this property had been shown towards the assets side nor depreciation was claimed by the assessee. Therefore, it could not be construed that the property was used for the purpose of business and accordingly the claim of expenses had been disallowed.
S.P. Bhati appeared on behalf of the assessee and N.T. Sherpa appeared on behalf of the Revenue.
The two-member Bench of Rajpal Yadav (Vice-President) and Manish Borad (Accountant Member) disallowed this ground of appeal filed by the assessee observing that, “Though the assessee has argued that these expenditures were incurred for the purpose of business but in the accounts, it has not been demonstrated as to how these properties were treated as a business asset and not as an investment. Unless the properties are being used for the purpose of the business expenditure attributable to maintaining them cannot be allowed.”
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