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Income Tax Appellate Tribunal, KOLKATA ‘SMC’ BENCH, KOLKATA
Before: Shri P.M. Jagtap
This appeal filed by the assessee is directed against the order of ld. Commissioner of Income Tax (Appeals)-VIII, Kolkata dated 08.10.2014 for the assessment year 2006-07 and the solitary issue arising out of the same relates to the disallowance made by the Assessing Officer and sustained by the ld. CIT(Appeals) on account of the following expenses:- (a) Conveyance charges Rs. 2,638/- (b) General expenses Rs. 12,974/- (c) Printing & Stationery Rs. 4,780/- (d) Salary & Bonus Rs.3,63,057/- (e) Staff Welfare Rs. 2,635/- ./2015 Assessment year: 2006-2007 Page 2 of 4
(f) Legal expenses Rs.1,01,200/- (g) Electric charges Rs. 30,240/- (h) Telephone expenses Rs. 12,653/- (i) Interest Rs. 12,800/- (j) Preliminary expenses written Rs. 13,080/- off u/s 35D
The assessee in the present case is a Company, which filed its return of income for the year under consideration on 11.11.2006 declaring total income of Rs.7,13,640/-. In the said return, income from house property was declared by the assessee at Rs.12,71,828/-, while loss was declared under the head “income from business” to the tune of Rs.5,58,187/-. During the course of assessment proceedings, it was found by the Assessing Officer that there was no business activity actually carried on by the assessee during the year under consideration. In the absence of any business carried on by the assessee-company, various expenses claimed by the assessee as business expenses under the various heads were held to be not allowable by the Assessing Officer. He also noted that there was a failure on the part of the assessee to produce the relevant documents and vouchers to establish the genuineness of the said expenses. He, however, allowed the expenses claimed by the assessee only to the extent of Rs.9,142/-, as the same, according to the Assessing Officer, were in the nature of statutory expenses required to be incurred by the assessee to run a Company. Accordingly, the total income of the assessee was determined by the Assessing Officer at Rs.12,80,380/- in the assessment completed under section 143(3) vide an order dated 22.12.2008.
On appeal, the ld. CIT(Appeals) confirmed the disallowance made by the Assessing Officer on account of various expenses on the ground that in the absence of any business activity carried on by the assessee, its claim for deduction on account of business expenses was not allowable. ./2015 Assessment year: 2006-2007 Page 3 of 4 Aggrieved by the order of ld. CIT(Appeals), the assessee has preferred this appeal before the Tribunal.
I have heard the arguments of both the sides and perused the relevant material available on record. At the time of hearing before me, ld. Counsel for the assessee has not been able to establish on evidence that any business activity was actually carried on by the assessee during the year under consideration. He, however, has raised an alternative contention by relying on the decision of the Hon’ble Calcutta High Court in the case of CIT –vs.- Ganga Properties Limited [62 Taxman 285 (Cal)] that a Limited Company that even if it does not carry on business, it has to maintain its establishment for complying with statutory obligation so long as it is in operation. He has contended that although the Assessing Officer has allowed a sum of Rs.9,142/- only on account of statutory expenses incurred by the assessee to run a Company, there are various other expenses which are also incurred by the assessee to maintain its establishment for complying with statutory obligation. Although the ld. D.R. has vehemently opposed this contention of the ld. Counsel for the assessee by pointing out that the genuineness of various expenses as claimed by the assessee was not established by the assessee by producing the relevant documentary evidence, he has submitted that if at all the Tribunal is inclined to accept an alternative contention of the ld. Counsel for the assessee, an opportunity may be given to the Assessing Officer to verify that the expenses claimed by the assessee to certain extent were incurred in order to maintain its establishment for complying with statutory obligation. I find merit in this contention of the ld. D.R. and since the ld. Counsel for the assessee has also not raised any objection in this regard, I restore this issue to the file of the Assessing Officer for the limited purpose of giving the assessee an opportunity to establish that the expenses in question to some extent were incurred in order to maintain its establishment for complying with statutory obligation. Assessing Officer shall consider and verify the claim of the assessee in the ./2015 Assessment year: 2006-2007 Page 4 of 4 light of the decision of the Hon’ble jurisdictional High Court in the case of Ganga Properties Limited (supra).
In the result, the appeal of the assessee is treated as partly allowed for statistical purposes. Order pronounced in the open Court on October 9th, 2015.