No income can be earned without incurring expenditure even if shown as IFOS & not business Income: ITAT

The brief facts of the case are the assessee is an individual deriving income from hire charges of JCB Machines. During the assessment proceedings, the Assessing Officer disallowed expenses of Rs.5,25,100/- on account of salary and machinery maintenance expenses. The Assessing Officer disallowed the same by holding that the rental income was shown not under the head “business” but shown under the head “other sources”.

Being aggrieved by the above addition, an appeal was preferred before the ld. CIT(A), who vide impugned order confirmed the addition on the ground that the appellant had not furnished the details of salaries and machinery maintenance expenses, not produced vouchers in respect of such expenditure nor the mode of payments and also failed to prove that such expenditure was incurred wholly and exclusively for the purpose of earning income offered to tax under the head “income from other sources”. Being aggrieved by the above decision of the ld. CIT(A), the appellant filed an appeal before the tribunal.

ITAT observed that the hire charges from JCB can be earned without incurring any expenditure on salaries and fuel expenses etc. No doubt, the appellant had not adduced any evidence in support of incurring of such expenditure, but merely because the appellant was not able to produce the evidence, it does not lead to the conclusion that the appellant had not incurred any expenditure to earn such income. There is no obligation under law to maintain any books of accounts etc. since the turnover of the appellant has not exceeded the prescribed limit. The Assessing Officer as well as the ld. CIT(A) had chosen to disallow the entire expenditure without appreciating the fact that no income of hire charges can be earned without incurring expenditure on salaries and fuel etc. This approach of lower authorities is unreasonable and arbitrary. In the circumstances, the disallowance of Rs.5,25,100/- cannot be upheld and, accordingly, direct the Assessing Officer to delete the same.

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