Partial Disallowance of Business Expenses Justified Despite Minimal Business Activity: ITAT Reduces Disallowance to Fixed Amount [Read Order]
In a relief to assessee the ITAT limits disallowance to reasonable extent
![Partial Disallowance of Business Expenses Justified Despite Minimal Business Activity: ITAT Reduces Disallowance to Fixed Amount [Read Order]](https://images.taxscan.in/h-upload/2026/04/03/2131639-partial-disallowance-of-business-expenses-justified-despite-minimal-business-activityjpg.webp "Partial Disallowance of Business Expenses Justified Despite Minimal Business Activity: ITAT Reduces Disallowance to Fixed Amount [Read Order]")
The Income Tax Appellate Tribunal (ITAT) DelhiBench has allowed the appeal of the assessee in part and has restricted the amount of disallowance of businessexpenses to a fixed amount of ₹1,00,000. The assessee BSM Developers Pvt Ltd. who was a real estate company had shown income from house property and a small income of ₹76,223 from trading activities in building...
The Income Tax Appellate Tribunal (ITAT) DelhiBench has allowed the appeal of the assessee in part and has restricted the amount of disallowance of businessexpenses to a fixed amount of ₹1,00,000.
The assessee BSM Developers Pvt Ltd. who was a real estate company had shown income from house property and a small income of ₹76,223 from trading activities in building materials.The Assessing Officer had disallowed a number of expenses amounting to ₹22.41 lakh on the basis of the fact that no substantial business was carried out during the year.The CIT(A) had allowed the disallowance of ₹20.71 lakh.
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The assessee claimed that it was a business of real estate and the business of trading building materials. It was also claimed that the absence of substantial business during the year was due to adverse conditions.
Further,It was contended by the assessee that business activity was there, and therefore, the expenses incurred by the assessee are allowable. On the other hand, the Revenue contended that there was no substantiation of business activity by the assessee. It was also contended by the Revenue that there was no direct nexus between the expenses and business income.
The Tribunal comprises Satbeer Singh Godara (Judicial Member) and Naveen Chandra (Accountant Member) that there was some business income earned by the assessee. Therefore, it cannot be held that there was no business activity during the relevant assessment year. It was also held by the Tribunal that the business activity was minimal and not sufficient to claim the entire expense.
Accordingly, it was held by the Tribunal that instead of going into the details of each expense, a reasonable approach would be to restrict the disallowance to a lump sum of ₹1,00,000. Therefore, a substantial relief of ₹19.71 lakh was allowed to the assessee.
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