The Bangalore Bench, of the Income Tax Appellate Tribunal, held that set-off of income under ‘house property’ against loss is not allowable to a closed business.
The assessee was represented by Shri Narendra Sharma and the revenue was represented by Smt. Priyadarshini Basaganni.
The assessee a private limited company filed its return of income for the year under consideration declaring a loss of Rs.76,26,766/-. The AO rejected the rental income declared by the assessee, as it was shown under the head, “Income from business” and assessed the rental income under the head,” Income from house property”, after allowing deduction u/s. 24 of the Act. Further disallowed the set off of the income under the head, “house property”, against the business loss claimed by the assessee.
The CIT(A) on appeal disallowed the set off of current year business loss, against the income from house property on the ground that the business of the assessee was closed and the assessee did not have any receipt from operations of the business during the year.
The assessee contended that it is a going concern, as there was only a temporary lull in its activity due to dispute among family and the business activity has not been closed. Further submitted that a temporary lull in the business cannot be treated as the closure of business.
The assessee stated that he had incurred expenses in terms of salary, vehicle maintenance, and taxes which were day-to-day expenses, to keep the business alive. He submitted that, merely because no income is generated during the year, cannot lead to disallowance of the expenditure, incurred for business
Chandra Poojari, accountant member and Smt. Beena Pillai, judicial member observed that the assessee failed to establish by way of any documents that these expenses were incurred for business. The Coram didn’t find any infirmity in the view taken by the CIT(A) and upheld the same. The appeal filed by the assessee was dismissed.
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