TMI Blog2013 (1) TMI 784X X X X Extracts X X X X X X X X Extracts X X X X ..... facts and in the circumstances of the case and in law, the learned CIT(A) erred in law and in facts in disallowing the business loss of ₹ 6,75,273 claimed by the appellant. 4. The learned CIT(A) erred in law and in facts in disallowing the following expenses: Particulars Amount Travelling Expenses 1,00,609 Repairs Maintenance 38,916 Rates Taxes 27,291 Maintenance Charges 31,500 2. The only issue involved is, disallowance of business loss of ₹ 6,25,273, and consequential disallowance of certain expenditure on the ground that the assessee has not carried out any business activities in the impugned assessment year. 3. Brief facts, as noted by the Assessing Officer are that the assessee is engaged in the business of investment activity and letting out of property. During the year, the assessee had shown income under the heads Income From House Property , Long Term Capital Gains and Income From Other Sources . The taxable inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pment and renting of premises and investment, therefore, various expenses incurred by it, has been claimed as deduction. There is no cessation of business activities but income from business activity could not be received in this year. Reference was also made to the object clauses given in the MOU, wherein property development was also one of the main activities. It was submitted that the assessee has advanced ₹ 6,28,63,212, for the purchase of property to develop the same which is within the realm of real estate development and it is a part of its authorised business activity. In support of the contentions that the expenditure claimed should be allowed, reliance was placed on the judgment of Calcutta High Court in CIT v/s Ganga Properties Ltd., [1993] 199 ITR 94 (Cal.). 5. The Commissioner (Appeals) did not agree with the contentions of the assessee on the ground that income earned by the assessee during the year is attributable to the heads other than business and profession and no expenses can be attributed to the business activity. The brokerage business of the assessee had stopped prior to March 2006, and subsequently, there was no such business. The income which the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Postage, Telegram Telephone Expenses 3,345 3,345 Printing and Stationary 350 350 Rates and Taxes 830 830 Repairs and Renovation 38,916 38,916 Travelling Expenses 1,00,609 1,00,609 Professional Fees 30,000 30,000 Depreciation on Motor Car / Computer 1,50,316 1,50,316 Total 6,87,626 1,19,874 5,67,752 Expenses disallowable u/s 14A 1,28,666 Total 6,87,626 1,19,874 4,39,086 He also heavily relied upon the judgment of Calcutta High Court in Ganga Properties Ltd. (supra). 7. On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or carrying out investment activities and letting out of the property. The assessee has also made advance with a view to engage in real estate development. For carrying out all the activities, it has to maintain its establishment for complying with various statutory obligations and the operations of the company even if the assessee is having income under the different heads. Even under the head Income From Other Sources , the expenditure incurred by the company has to be allowed. Looking to the nature of expenses claimed by the assessee, it is seen that most of these expenses pertain to normal operation of the company and for carrying out various activities as per its object clause in MoU. The Hon'ble Supreme Court in CIT v/s Raghunandan Prasad Moody, [1978] 115 ITR 519 (SC), while interpreting the allowability of expenditure under section 57(iii), observed as under: 4. What s. 57(iii) requires is that the expenditure must be laid out or expended wholly and exclusively for the purpose of making or earning income. It is the purpose of the expenditure that is relevant in determining the applicability of s. 57(iii) and that purpose must be making or earning of income. Sec. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e no difference to this process whether the expenditure is X or Y or nil; whatever is the proper expenditure allowed by the statute would be debited. Equally, it would make no difference whether there is any income and if so, what, since whatever it be, X or Y or nil, would be credited. And the ultimate income or loss would be found. We fail to appreciate how expenditure which is otherwise a proper expenditure can cease to be such merely because there is no receipt of income. Whatever is a proper outgoing by way of expenditure must be debited irrespective of whether there is receipt of income or not. That is the plain requirement of proper accounting and the interpretation of s. 57(iii) cannot be different. The deduction of the expenditure cannot, in the circumstances, be held to be conditional upon the making or earning of the income. It is true that the language of s. 37(1) is a little wider than that of s. 57(iii), but we do not see how that can make any difference in the true interpretation of s. 57(iii). The language of s. 57(iii) is clear and unambiguous and it has to be construed according to its plain natural meaning and merely because a slightly wider phraseology is employ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to be allowed, as these expenses mostly pertain to carrying out of various operations and activities carried on by the assessee company, which are necessary for maintaining a corporate establishment and are intricably linked for earning of the income under various heads, as shown by the assessee. The following expenses are allowable, which also includes some of the expenses allowed by the learned Commissioner (Appeals): Sl.no. Particulars Amount claimed (Rs. ) 1. Directors Remuneration 2,58,000 2. Salaries 63,000 3. Staff Welfare 707 4. Audit Fees 22,472 5. Insurance 6,381 6. Other Expenses 12,700 7. Postage, Telegram Telephone Expenses 3,345 8. Printing and Stationary 350 9. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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