BSM Developers Pvt. Ltd. Vs ACIT (ITAT Delhi)
The appeal before the Income Tax Appellate Tribunal arose from the order of the Commissioner of Income Tax (Appeals) for Assessment Year 2014–15, wherein disallowance of business expenses amounting to ₹22,41,977/- was largely upheld. The Assessing Officer had observed that the assessee declared a loss under the head “Business & Profession” while deriving substantial income from house property. Out of total income of ₹91,54,878/-, a major portion constituted rental income, and only a minor amount was shown as business income, including ₹76,223/- from trading in building materials.
The Assessing Officer concluded that the assessee had not carried out any substantial business activity during the year and that the expenses claimed were not directly related to business income. Accordingly, employee expenses, establishment expenses, and finance charges were disallowed. On appeal, the CIT(A) partly accepted the assessee’s contention by deleting ₹1,70,765/- on account of expenses already disallowed by the assessee itself in its computation. However, the balance disallowance of ₹20,71,212/- was confirmed.
The CIT(A) noted that the assessee failed to substantiate actual business activity, as there was no purchase or sale of real estate during the year and only minimal trading activity in building materials. It was also observed that the expenses appeared to be more related to earning rental income rather than business income, for which only standard deduction under section 24 is permissible. The CIT(A) concluded that the assessee had not adequately demonstrated the nexus of the claimed expenses with business operations and upheld the majority of the disallowance.
