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2016 (4) TMI 39 - AT - Income TaxDisallowance of expenses - business expediency - Held that:- In the case of CIT versus Rajendra Prasad Moody (1978 (10) TMI 133 - SUPREME Court ), while deciding the issue for deduction for expenses under the head income from other sources, the Hon’ble court has held that what section 57(iii) requires is that the expenditure must be laid out or expended wholly and exclusively for the purpose of making or earning income and the section does not require that this purpose must be fulfilled in order to qualify the expenditure for deduction and it does not say that the expenditure shall be deductible only if any income is made or earned. The same principle applies for allowability of deduction of expenditure under the head profit and gains of business. Thus in our considered view the expenses debited by the assessee in the profit and loss account and claimed under the head profit and gains of the business are allowable both on the principle up consistency as well as business expediency. Accordingly the findings of the Ld. Commissioner of Incometax( Appeals) on the issue in dispute are reversed. Disallowance of depreciation - building was let out and the rental income from the same was claimed under the head income from house property - Held that:- As the building was let out and therefore the depreciation corresponding to that part cannot be allowed to the assessee. In subsection (2) of section 38 of the Act, it is clearly laid down that where any building is not exclusively used for the purpose of business or profession the deductions under clause (ii) of subsection (1) of section 32 shall be restricted to fair proportionate part thereof which the Assessing Officer may determine having regard to the use of such building for the purpose of business or profession. Thus in view of the clear provisions of the Act in this regard, we restore the issue to the file of the Assessing Officer and direct the Assessing officer to allow the depreciation in accordance with the provisions of section 38(2) of the Act.
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