ITO, CORP WARD-1(4), CHENNAI vs. DEV ELECTRONICS PVT LTD, CHENNAI

The assessee being resident corporate assessee admitted income of Rs.18.66 Lacs from house property on leasing out of factory premises. Against the same, the assessee claimed business loss of Rs.3.37 Lacs. The Ld. AO denied the same on the ground that the assessee did not earn any business income other than Income from house property. The business of the assessee had closed down and it had leased out factory premises. The assessee debited expenditure of Rs.11.94 Lacs out of which the expenditure as incurred in connection with earning of house property income was suo-motu disallowed by the assessee. However, the balance expenditure of Rs.3.37 Lacs was claimed as business expenditure. In the absence of any business income, the same was finally not allowed by Ld. AO.

The Ld. CIT(A), in para 4.4 of the impugned order, noted that the business became obsolete due to technological advancement in electronic field. However, the establishment expenses of the assessee could not be ruled out. The expenditure claimed by the assessee was incurred in the course of existence of the company. Therefore, the same was to be allowed. Aggrieved, the revenue is in further appeal before us.

The Ld. AR has placed on record the details of expenditure of Rs.3.37 Lacs. Upon perusal of the same, we find that the substantial expenditure has been incurred on payment of salaries, staff welfare, rent, accounting and consultancy charges etc. All these expenses are necessarily to be incurred for continuance of corporate entity of the assessee and the same has to be incurred notwithstanding the fact the no business has been carried out by the assessee. The expenditure incurred towards earning of house property income has already been disallowed by the assessee. Therefore, the expenditure has rightly been allowed by Ld. CIT(A). We order so.

The appeal stands dismissed. Order pronounced on 11th September, 2024.