SNW Smith Consultant Private Limited Vs DCIT (ITAT Delhi)
Even idle business needs guards – Tribunal permits security expense though no turnover- ITAT Delhi allows security-service expense in full & restricts lawyer’s-fee disallowance to 50% — even dormant business must bear essential costs
This appeal arose from the order of CIT(A), confirming disallowances of ₹10 lakh (legal fees) & ₹8.66 lakh (security charges) made by AO on the ground that Assessee had no business income during A.Y. 2018-19. The case was a second-round proceeding after ITAT’s earlier remand in ITA No. 1588/Del/2020 directing verification of expenses even though no business revenue was declared.
Assessee, a consultancy company in trade-finance advisory, explained that its operations had experienced a temporary lull but the business had not ceased. It shifted to the basement premises of its associate concern at Thapar House to reduce costs & continued maintaining establishment & statutory compliance. The legal fee of ₹10 lakh was paid to Shri Rajesh Narain Gupta, Advocate, for advisory on NBFC licensing & trade-finance structures; & ₹8.66 lakh was paid to G4S Secure Solutions for security services at the office premises. AO disallowed both expenses holding that Assessee had no active business or rent outgo. CIT(A) confirmed, observing that Assessee failed to prove business continuity & purpose of legal opinion.
