Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2019 (10) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2019 (10) TMI 1027 - AT - Income TaxAllowable business expenditure u/s 37(1) - closer of the business - assessee due to slow down in information technology sector globally the company decided to postpone the commencement of its software development activities, thus, leading to a conclusion that though business was set up the business activities have not been commenced - HELD THAT:- Expenditure not incurred wholly for the purpose of the business can be disallowed. We also find that the relevant bills & vouchers for the expenses have not been produced before the Assessing Officer in order to prove that the genuineness and allowability of the expenses. Thus, the expenditure incurred before commencement of business have been rightly segregated by the CIT (A) under the head salaries, recruitment & relocation, common services, travelling & conveyance, legal & professional charges as pre-commencement expenditure which are hereby confirmed. Expenses of business promotion, sales commission, communication, travel & conveyance, repair & maintenance, legal & professional fee, contribution to PF, the assessee could not submit any voucher before the assessing authorities. It is the primary duty of the assessee to produce the basic evidences in relation to the expenses claimed, so as to allow the expenses u/s 37 of the Income Tax Act. Since, no details could be produced as to the expenses claimed, no allowance can be given by the revenue. Hon’ble Bombay High Court in the case of ALD Automotives Pvt. Ltd. [2018 (3) TMI 534 - BOMBAY HIGH COURT] wherein it was held that where assessee failed to produce necessary evidence to prove that business was set up and it was ready to commence, expenditure incurred by assessee prior to setting up of business could not be allowed. Disallowance out of the salary, we find that the assessee could provide the PAN number of only three employees correctly out of the 28 employees on the list. The assessee could not furnish the details of salary payment even through the bank statement or by any documentary evidence regarding the rendering of the services by the employees to support the claim. Hence, based on the judgment of Hon’ble Apex Court in the case of Swadeshi Cotton Mills [1966 (9) TMI 30 - SUPREME COURT] in the absence of any other evidence produced by the assessee, we decline to interfere in the order of the ld. CIT (A). Rent claimed for the year ending 31.03.2001, the same is allowed as the expenses is related to setting up of the business notwithstanding the fact that the revenue earning business activities have not been commenced. Rental expenses claimed by the assessee for the subsequent period are not allowable as they do not pertain to the assessment year in question. Regarding the claim of business loss on account of rent, the ld. AR’s contentions that the expenses was incurred during the year as the liability for payment of which in terms of lease deed has accrued and arisen during the year under consideration. Since, we have already allowed the rent paid for the current year, no future allowance for the rent can be allowed during the year even it is deemed to have accrued by the virtue of leased deed entered during the year. Penalty levied u/s 271(1)(c) - HELD THAT:- The assessee owing to closure of the business could not furnish the details which certainly have not been proved by the revenue as bogus in nature. Further, no case has been made by the revenue to prove that the claim of the assessee is ex-facie bogus has held in the case of Escort Finance Ltd [2009 (8) TMI 677 - DELHI HIGH COURT] relied upon by the Ld.CIT(A). Hence, keeping in view the peculiar facts and circumstances of the case that the disallowances have been made by the revenue merely on the reason that the assessee could not produce the relevant vouchers & bills owing to closure of the business in India, we hereby delete the penalty levied u/s 271(1)(c) - Decided in favour of assessee.
|