Madhya Pradesh State Industries ... vs Department Of Income Tax
Finance Charges 1679.00 0.00 7291.66. 8970.66
Total Expenses Before 7871664.00 110764.00 4702247.66 12684675.66
Depreciation 192653.00 18027.00 0.00 210680.00
Total 80643 I 7.00 128791.00 4702247.66 12895355.66
Fringe Benefit Tax 0.00 0.00 1891.00 1891.00
Grand Total 8064317.00 128791.00 4704138.66 12897246.66
If the expenses incurred by the assessee under different heads
are analysed, in the light of the finding recorded by the learned
CIT(A), we find that the amount of Rs.30,89,247/- was incurred
on account of maintenance and operation of "Head Office
especially when the assessee is a corporate entity and has not
wound up its business. Such expenses have been incurred for
smooth running and to keep the corporate entity live. Regarding
the remaining expenses of Rs. 78,71,664/- out of the total
expenses of Rs.1,28,95,256/- wherever the learned CIT(A) found
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that such expenses were essentially not incurred for genuine
purposes, the same were disallowed and the genuine expenses to
the extent of Rs.30,89,247/- which were necessary for smooth
functioning were only allowed by the learned CIT(A). While
coming to this conclusion, reliance has already been placed in
CIT vs. Rampur Timber & Tannery Co. Pvt. Ltd.; 129 ITR 58 (All)
and Chennai & Co. Pvt. Ltd. V. CIT; 206 ITR 616. It is pertinent
to mention here that no expenses in respect of manufacturing
activities have been allowed by the learned CIT(A). It is further
noted that the expense like salary, employees' contribution to PF
and Pension fund, staff welfare, telephone, salary to home guard,
travelling expenses, printing and postage, legal expenses,
electricity and water charges, etc. are necessary to keep the
corporate entity live. Nowhere the Assessing Officer has brought
on record that any expenditure was incurred for extraneous
consideration, therefore, the ITO is not expected to decide the
reasonableness because it is the assessee who knows his
business interest better. Reasonableness is to be decided by the
assessee though the Assessing Officer is empowered to disallow
the payment/expenditure if made for extra commercial
consideration. In view of the uncontroverted finding recorded by
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the learned CIT(A), we find no infirmity in the order of the learned
CIT(A) on the issue and confirm the same, resulting into
dismissal of the ground.