DCIT Vs Presidency Exports and Industries Ltd. (ITAT Kolkata)
Material Facts
The Revenue appealed against the CIT(A)’s order deleting the disallowance of business expenditure of ₹3,50,04,017 and the addition of ₹1,10,07,745 for AY 2018-19. The assessee, engaged in the export business, had reported nil business income but earned lease rental income of ₹1,57,25,350. The Assessing Officer treated the rental income as income from house property and disallowed business expenditure, holding that the absence of sales indicated cessation of business.
Proceedings and Submissions
Before the CIT(A), the assessee submitted that export operations had temporarily stopped due to adverse market conditions but the business had not been closed. It stated that its establishment, workforce, infrastructure and business licences were maintained with the intention of reviving operations. The assessee also contended that the leased property formed part of its commercial assets and that the expenses represented administrative, finance and maintenance costs incurred for continuing the business.
Findings
The CIT(A) found that audited financial statements, fixed assets, statutory filings and continued maintenance of business infrastructure established continuity of business. The leased property was held to be a commercial asset temporarily let out during an idle period, and the rental income was treated as business income. The disallowance of finance cost was also deleted as no conclusive evidence supported diversion of borrowed funds.
