Inactivity for a limited period does not mean that business ceased to exist. Accordingly, expenditure is allowable even though no business income is earned during such period

Recently ITAT Mumbai in the case of Bechtel International Inc., USA Vs. ADIT held that mere inactivity for a limited period does not mean that the taxpayer’s business ceased to exist or that it did not carry on any business at all. Expenditure incurred during the said period of inactivity / lull is allowable even though the taxpayer has not earned any business income.

Further, the Tribunal held that no interest can be charged under Section 234B and Section 234C of the Income-tax Act, 1961 (the Act) in case of a non-resident taxpayer in view of the legal position that all payments chargeable to tax made to non-residents are subject to tax deduction under Section 195 of the Act and hence no default can be attributed to the taxpayer for non-payment of advance tax.