ITAT Surat Allows Expense Linked to Settled Dues Despite No Business Income 

DCIT Vs ABS Exports (ITAT Surat)

In this case, the Revenue filed an appeal against the order of the Commissioner of Income Tax (Appeals)-4, Surat, concerning Assessment Year 2018–19. The core issue revolved around the deletion of a disallowance of expenses amounting to ₹2,30,57,897 under Section 37 of the Income Tax Act, 1961.

The assessee had filed its return declaring nil income and a loss of ₹1,17,59,363. The case was selected for limited scrutiny, and the Assessing Officer completed the assessment under Section 143(3), determining total income at ₹1,12,98,530 after disallowing the said expenses. The disallowance was primarily based on the contention that the assessee had no business activity during the relevant period and that the expenses were not allowable, especially when income was shown under the head “house property.”

The Revenue argued that the CIT(A) erred in allowing the deduction, ignoring that the assessee had not reported business income since Assessment Year 2015–16. It was further contended that unsuccessful bidding does not constitute business activity and that the nature of expenses did not align with the heads of income prescribed under Chapter IV of the Act.

On the other hand, the assessee contended that the expenses were related to occupation charges payable to the Kolkata Port Trust, including applicable service tax, GST, and interest. These dues pertained to an earlier period but were settled during the relevant assessment year. The assessee also submitted that the interest component was ultimately not enforced by the Kolkata Port Trust.