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of <h1>Tribunal allows business expenses for non-banking finance company, dismissing Revenue's appeal</h1> <h3>DCIT. Kolkata Versus M/s. Anchor Investment Pvt. Ltd.</h3> DCIT. Kolkata Versus M/s. Anchor Investment Pvt. Ltd. - TMI Issues:Appeal by Revenue against CIT(A) order for assessment year 2006-07 disallowing expenses under various heads u/s 37(1) of the IT Act.Analysis:The Revenue raised grounds against CIT(A) allowing relief to the assessee u/s 37(1) of the IT Act for expenses like management fees, salary, office rent, traveling, and telephone expenses. The AO disallowed these expenses considering the substantial income of the assessee from 'profit on sale of investment,' interest, and dividend income. The AO believed such huge expenditures were unnecessary. However, the CIT(A) deleted part of the disallowed expenses, stating they were wholly and exclusively for the purpose of business under section 37(1) of the Act. The Revenue argued against this deletion, supporting the AO's decision.The assessee, a non-banking finance company, defended the expenses, explaining they were essential for maintaining staff, office, and managing investments. The CIT(A) justified deleting the disallowed expenses, emphasizing they were incurred in the course of business. The Tribunal noted that once it's established the assessee is a company with business income, expenses incurred in the business cannot be disallowed. The disallowance wasn't due to unverifiable expenses but rather the AO's opinion that such expenses were unnecessary given the income under section 48 of the Act. The Tribunal found that the CIT(A) deleted the expenses on an ad hoc basis without filing an appeal against the confirmed disallowances.The Tribunal upheld the CIT(A)'s decision, considering the assessee's status as an investor with business income, some of which is tax-exempt. Since the Revenue didn't dispute the assessee's business income, the Tribunal concluded the CIT(A)'s findings were justified and dismissed the Revenue's appeal.
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