The Tax Publishers2021 TaxPub(DT) 0195 (Chen-Trib)

INCOME TAX ACT, 1961

Section 37(1)

Where assessee had failed to file any evidence to prove that depreciation claimed on air-conditioner and motor car is having nexus with income earned for the year and failed to file any evidence to prove that there was nexus between miscellaneous expenditure, interest on vehicle loan and repairs & maintenance, other income being rental income, interest income and dividend income earned for the year, therefore, additions made by AO towards various expenditure was debited into profit and loss account.

Business expenditure - Disallowance of various expenditure debited into profit and loss account - Allowability -

Assessee claimed various expenses against income from other sources like salary, repairs and maintenance, interest on vehicle loan, depreciation and miscellaneous expenses. AO called upon the assessee to explain nexus between the expenditure debited into profit & loss account and business operations. He submitted that although, it had not carried out any business activity due to strike by workers, but it has continued to incur certain expenditure to keep plant & machinery in active condition and also corporate identity of the assessee and hence, it cannot be said that expenditure incurred is not having nexus with the business activity of the assessee. According to AO, expenditure debited to profit & loss account under various heads including miscellaneous expenses, depreciation on air-conditioner and motor car, repairs and maintenance, interest on vehicle loan and salary was not related to business activity of the assessee and accordingly, disallowed all expenses. However, in respect of salary he had allowed 75% of salary paid on the ground that even if no business income, assessee need to pay salary expenditure for staff to maintain records. Held: Assessee had failed to file any evidence to prove that depreciation claimed on air-conditioner and motor car is having nexus with income earned for the year. Likewise, assessee had failed to file any evidence to prove that there is nexus between miscellaneous expenditure, interest on vehicle loan and repairs & maintenance, other income being rental income, interest income and dividend income earned for the year. As regards salary, CIT(A) considering the fact that assessee need to pay salary expenditure to employees, even though there was no business operations for the year, had allowed 50% salary debited into profit and loss account. Therefore, additions made by AO towards various expenditure was debited into profit and loss account.

REFERRED :

FAVOUR : Against the assessee.

A.Y. : 2016-17



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