By TIOL News Service

MUMBAI, MAR 01, 2018: THE issue is - Whether expenditure incurred to safeguard the corporate structure and the going concern status of a company, deserves to be allowed, while determining total income. YES IS THE ANSWER.

Facts of the case:

The assessee company is engaged in the business of running the Hotels, however, it carried on no business activity during the year under consideration. During the assessment, the AO noticed that assessee had debited various expenses of Rs.29,45,917/- such as power and fuel, Investment written off, rates and taxes, legal and professional, payment to auditors and other miscellaneous expenses. He therefore asked the assessee to furnish details of expenses debited to P&L A/c and also to justify the allowability of these expenses, as there was no business activity during the year under consideration. In respect of allowability of such expenses, the assessee stated that temporary withholding of business was no reason for disallowance of expenses. The AO however found the submissions of assessee to be not acceptable.

Tribunal held that,

++ it is seen that the facts of the case and the documents submitted by AR indicate that there is no intention of the assessee to permanently discontinue the business. The assessee is engaged in actively reviving the business. Hence, certain expenditure is required to be incurred in this regard and also to safeguard the corporate structure and going concern status of the assessee company. Accordingly, this Tribunal set aside the orders of I-T authorities and hold that the expenses claimed needs to be allowed.

(See 2018-TIOL-325-ITAT-MUM)