Expenses not allowable on Failure to prove that it was incurred for business purpose

Onus lies on the assessee to prove that the expenditure was incurred for the purpose of business. Once the assessee discharges this onus, assessee would be entitled to deduction under section 37(1). In the present case, no factual condition was laid by the assessee to establish that this expenditure was incurred for business purpose nor any attempt is discernible before the lower authorities. Mere bald assertion that the expenditure was incurred for promoting business cannot be accepted without establishing the nexus between expenditure and business. Therefore, it amounts to application of income voluntarily towards charity which cannot be allowed as a deduction.

These are appeals filed by the assessee- firm directed against the common order of the Commissioner (Appeals), Gulbarga, dated 29-1-2016 for the assessment years 2011-12 and 2012-13. Since common issue is involved in both the appeals, we proceed to dispose of the same by this common order.

2. For the sake of clarity and convenience, facts relevant to assessment year 2011-12 (ITA No. 782/Bang/2016) are stated herein. The assessee raised the following grounds of appeal :–

“1. The orders of the learned Lower Authorities are bad in law and contrary to the evidences and facts on record.

2. The learned Commissioner (Appeals) has erred in upholding the dis allowance of Rs. 10,823 without appreciating that the expenditure was not prohibited by law or in the nature specified by Explanation under section 37(1).

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