ACIT CIRCLE-8(1), NEW DELHI vs. EMCIPI ELECTRONICS PVT LTD, NEW DELHI

Brief facts of the case are that, the assessee filed its return of income on 26.09.2010 showing the total income of Rs.2,16,45,540/-. The case was selected for scrutiny and the notice u/s 143(2) of the I.T Act was issued and served on 23.09.2011. In response to notice u/s 143(2) of the I.T Act, the Authorized Representatives of the assessee company attended the assessment proceedings and furnished the detail called for. The assessment order came to be passed on 28/01/2013 by disallowing the expenses of Rs. 3,60,09,520/- claimed by the assessee under the business expenses and passed assessment order by assessing the total income of the assessee at Rs.5,75,55,060/- as against the returned income of Rs.2,16,45,540/-.

Aggrieved by the assessment order dated 28/01/2013, the assessee has challenged the same before the CIT(A). The Ld. CIT(A) vide order dated 06/02/2019, confirmed the addition to the extent of Rs. 82,75,866.20/- made by the A.O and allowed the expense claimed by the assessee as against the business income at Rs. 1,83,85,198/-, accordingly, partly allowed the Appeal on 11/02/2019.

The Department of Revenue aggrieved by the order dated 11/02/2019, filed the present Appeal on the grounds mentioned above.

The Ld. DR submitted that, the CIT(A) has committed an error in deleting an amount of Rs. 1,83,85,198/- on accounting of disallowance of expenses which was not occurred wholly and exclusively for the purpose of business. Further, the Ld. DR has relied on the order of the A.O.

Per contra, the Ld. Counsel for the assessee submitted that, the assessee has shown the business income in the subsequent years i.e. Assessment Year 2011-12 & 2012-13 which has been allowed as expenses against the business income shown under the head of consultancy and electricity and generator expenses. Further submitted that, so long as expenses are incurred for the purpose of business, the same should be allowable as deduction and it is not necessary that expenditure may result in income immediately, the quantum of income is therefore, irrelevant for the purpose of considering the allow ability of expenses. So long as expenses are incurred for the purpose of business, the expense is allowable as deduction. Thus, justified the order of CIT(A).

We have heard both the sides, considered the material on record. The Ld. CIT(A) while deleting the addition found that, the assessee has shown the business income in the subsequent year i.e. 2011-12 & 2012-13 and the A.O has allowed the expenses against the business income shown under the head of consultancy and electricity and generator expenses. Further found that, the Ld. Assessing Officer has not given any finding and without appreciating the accounts filed by the appellant disallowed the expenses against the business income shown by the assessee.

The issue of quantum of income and allowableness of the expenses it has to be seen that, whether the expenditure incurred wholly and exclusively for the purpose of business or not. So long as the expenses are incurred for the purpose of business, in our opinion the same should be allowable as deduction and it is not necessary that the expenditure may result in income or there must be substantial income. The said view has been supported by the decision of Hon'ble Supreme Court in the case of CIT Vs. Malyalam Plantation Ltd. 53 ITR 140 and CIT Vs. Rajinder Pd. Moodi 115 ITR 519.

In view of the above discussion, we do not find any error or infirmity in the order of CIT(A). Accordingly, the Grounds of Appeal of the Revenue are dismissed.

In the result, the Appeal of the Revenue is dismissed.