CA Suraj R. Agrawal
A business is “set up” and expenditure is deductible whether actually assessee got any customer and earned any business income during the year or not
Brief of the Case:-
The assessee may not have been successful in getting customers or earning the business income, but if the assessee has done requisite preparations and if the assessee can be said to be in a position to cater to its customers, then it can be said that business is set up and it would amount to carrying on the business and accordingly the expenses would stand allowable to the assessee, irrespective of the fact whether actually assessee got any customer and earned any business income during the year or not.
Case Summary:-
Facts of the case:
- The assessee was in the business of dealing in immovable properties and development rights etc.
- It was observed for by the AO that no business income was earned by the assessee company during the year. However, in the income tax expenditure account, the assessee has debited various expenses such as travelling expenses, conveyance, printing & stationery, audit fees, professional fees, sundry expenses and interest on statutory payments etc. aggregating to Rs. 2,69,275/-. The AO disallowed these expenses on the ground that there was no business income received by the assessee during the year.
- The assessee contested this issue before the Ld. CIT (A), wherein the Ld. CIT (A) confirmed the disallowance on the ground that no business was carried out during the year.
Contentions of Appellant:
Routine business expenses incurred during the normal course have been wrongly disallowed by the authorities and requested for reversing the action of AO and Ld. CIT (A).
Contention by Respondent:
The Ld. DR relied upon the orders of Ld. CIT (A) and the AO.
Ruling of Honorable ITAT/Court:
