Dhanyata Enterprises Vs DCIT (ITAT Delhi)
A.O. in the instant case disallowed expenses of Rs. 9,94,872/- on the ground that assessee has not carried-out any business activity and no business income has been declared and the assessee failed to produce the complete books of account, bills and vouchers etc. I find the Ld. CIT(A) upheld the action of the A.O, the reasons of which have already been reproduced in the preceding paragraph. It is the submission of the Learned Counsel for the Assessee that it has not stopped its business and is maintaining an office and there is simply lull in the business activity. It is also his submission that due to less number of students the assessee thought it prudent not to admit any student for this year to minimize its expenses. According to him, merely because there is no business income during the year and when the assessee otherwise has maintained its corporate identity and has kept everything ready for reviving the coaching/teaching activities at right time, the Revenue Authorities should not have disallowed the expenditure merely on the ground that there is no business activity carried-out during the year or no business income has been shown during the year.
Merely because assessee has not earned any business income during the year, but, has every intention to revive the same, therefore, the various expenses debited to the P & L A/c cannot be disallowed especially when the assessee is maintaining its Office and kept its infrastructure ready for future business.
FULL TEXT OF THE ORDER OF ITAT DELHI
ORDER
This appeal filed by the Assessee is directed against the Order dated 29.11.2019 of the Ld. CIT(A)-3, New Delhi, relating to the A.Y. 2014-2015.
2. Facts of the case, in brief, are that the assessee is a company and filed its return of income on 26.11.2014 declaring total income of Rs.34,01,900/-. From the various details furnished by the assessee, the A.O. noted that assessee-company was incorporated in January 2010 and till A.Y. 2013-14 had done business of imparting training in English Communication Skills, Personality Development & Grooming and Interview Techniques. Assessee-Company had entered into a franchise agreement with M/s BAFEL Academy Pvt Ltd. (British Academy for English Language) for providing training in English Communication Skills etc. Due to reduction in number of students, Assessee-Company has stopped fresh batches in A.Y. 20 13-14 onwards. During the year assessee-company earned interest income from investment in flat made with M/s. Vigneshwara Developments Pvt. Ltd. He further noted that the assessee had shown NIL Revenue from operations and shown income under the Head “Income from other sources” interest of Rs.46,03,500/- received from its investment in Flat made with M/s. Vigneshwara Developments Pvt. Ltd. Therefore, the assessee is not having any business receipts, but, mere interest receipts.
2.1. Since the assessee has not carried-out any business activity during the year and no business income has been declared, the A.O. asked the assessee to explain as why the expenses debited in the P & L A/c should not be disallowed. It was explained by the assessee that all the expenses incurred by the assessee are for the business purposes.
2.2. However, the A.O. was not satisfied with the explanation given by the assessee. He observed that apart from claiming salary expenses of Rs.6 lakhs under the Head “Employee Benefits”, the assessee has also incurred the following expenses :
