The Tax Publishers2021 TaxPub(DT) 0241 (Ahd-Trib)

INCOME TAX ACT, 1961

Section 37(1)

Where similar rent expenses were incurred by assessee in respect of same property in subsequent years 2014-15 and 2015-16 and AO had allowed the same while framing scrutiny assessment under section 143(3), therefore, AO was not justified in disallowing the rent expenses.

Business expenditure - Disallowance of rent expenses - Allowability -

Assessee was engaged in the business of trading in non-ferrous metals. During the course of assessment proceedings, AO noticed that assessee had incurred rent expenses as business expenses for premises taken on rent. On query, the assessee explained that due to expansion of the business operation of the company it had taken the premises on rent to carry out business and holding meetings with brokers/parties as staying in the hotel was costly and more expensive. AO had not agreed with the submission stating that assessee has not proved that such premises was used as guest house. Held: Looking to the revenue from operation of assessee company for assessment year 2012-13, expenses was only 0.05% of the total revenue from operation and there was increase in the revenue from operation for assessment year 2013-14 which demonstrate expansion in business operation of the assessee company. Similar rent expenses were incurred by assessee in respect of same property in subsequent years 2014-15 and 2015-16 and AO had allowed the same while framing scrutiny assessment under section 143(3), therefore, AO was not justified in disallowing the rent expenses.

Relied:Sayaji Iron & Engg. Co. v. CIT. (2002) 253 ITR 749 (Guj) : 2002 TaxPub(DT) 492 (Guj-HC) and Annapurna Ispat v. Asstt. CIT ITA No. 188/Ahd/2014 dt. 23-1-2017.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2013-14


INCOME TAX ACT, 1961

Section 37(1)

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