CHEMOIL ADVANCED MANAGEMENT SERVICES PVT. LTD.,CHENNAI vs. DCIT, CORPORATE CIRCLE - 1 (2), CHENNAI

The Order of the Commissioner of Income Tax (Appeals) is contrary to law, facts and circumstances of the case. 2.1 The Commissioner of Income Tax (Appeals) erred in upholding that the appellant is not eligible to claim business expense without generating business income out of operational activities. 2.2 The Commissioner of Income Tax (Appeals) ought to have appreciated that, the appellant need to incur the expenses for running the business irrespective of the fact that whether the business generates income or not. 2.3 The learned Commissioner of Income Tax (Appeals) erred in not appreciating that, the appellant has realized exchange gain during the year under appeal and that was treated by both the appellant & the assessing officer as business income. 2.4 Learned CIT(A) ought to have appreciated that normal administrative expenses such as salary, staff welfare expenses, audit fees, professional fees, repairs and maintenance, electricity charges etc are allowable deduction as long as the company is in existence.

None appeared for assessee. The Sr. DR pleaded for confirmation of impugned order. Having considered material on record and the orders of lower authorities, our adjudication would be as given in succeeding paragraphs.

The assessee being resident corporate assessee was assessed u/s 143(3) on 30.12.2017. It transpired that the assessee did not earn any revenue from operations. The only income offered by the assessee was rental income, interest on loans and forex gains. However, the assessee claimed total expenses of Rs.333.65 Lacs. The Ld. AO opined that except for depreciation and amortization of expenses, no other expenses could be allowed to the assessee in the absence of any revenue from operations. Accordingly, Ld. AO disallowed remaining expenses of Rs.266.83 Lacs. 4. Upon further appeal, Ld. CIT(A) noted that the expenses were actually incurred to earn other income and no deduction could be allowed to the assessee. However, the assessee had already disallowed sum of Rs.226.58 Lacs while filing the return of income. Therefore, only 3 - remaining Rs.107.06 Lacs was to be disallowed. Accordingly, Ld. AO was directed to reduce the disallowance to the extent of Rs.107.06 Lacs after due verification. Aggrieved, the assessee is in further appeal before us. 5. After careful consideration of factual matrix, we find that it is the finding of lower authorities that the expenses were incurred to earn other income only. In such a case, the same could not be allowed as business expenses. Therefore, the impugned order would not require any interference on our part. 6. The appeal stands dismissed. Order pronounced on 21st March, 2022.