In ITA No.290/SRT/2022 -ITAT- ITAT (Surat) rejects Adarsh Sahakari Ghar Bandhnari Mandali’s claim for deductions on Internet and Airtel expenses under Section 57 of the Income Tax Act
Member Pawan Singh (Judicial) [05-06-2023]

Read Order: Adarsh Sahakari Ghar Bandhnari Mandali Ltd v. Assistant Commissioner of Income-tax, Circle1(1)(2), Surat

Chahat Varma

New Delhi, June 6, 2023: Dismissing the appeal filed by Adarsh Sahakari Ghar Bandhnari Mandali Ltd. (assessee), the Surat bench of the Income Tax Appellate Tribunal held that under Section 57 of the Income Tax Act, deductions can only be made for expenditures that are solely incurred for the purpose of earning income, provided that the expenses are not capital expenditures or personal in nature. Therefore, the Tribunal ruled that the assessee's claim for expenses related to internet subscription and Airtel subscription under Section 57 of the Act was not allowable.

Brief facts of the case were that the assessee was a co-operative housing and it filed its return of income, declaring nil income. The Assessing Officer (AO) noted that the assessee claimed expenses of Rs. 2,72,830/- on account of internet subscription and Rs. 6,43,998/- on account of Airtel subscription. The AO disallowed these expenses under section 57 of the Income Tax Act, stating that they were not eligible for deduction. In its submission, the assessee argued that the expenses incurred on internet subscription were for the benefit of its members, who were directly related to the objectives of the society. As a mutual benefit society, the assessee contended that these expenses should be allowed as they are for the benefit of its members. Similarly, the assessee claimed that the Airtel subscription expenses were also incurred for the benefit of its members, in line with the nature of a mutual benefit society.

The Tribunal held for a deduction to be allowed under Section 57 of the Income Tax Act, there must be a clear nexus between the expenditure incurred and the interest income earned, which was totally missing in the present case.