Issues before tribunal:
- Whether expenses incurred for maintaining corporate entity & expenditure for day to day functioning of the company are allowable expenses u/s 37 even when no business activity was carried out by the assessee?
- Whether claim of set off of brought forward losses depreciation brought forward from earlier years should have been allowed?
Brief Facts:
- Assessee had been engaged in the business of investing, leasing & financing since 1992 and in the course of business receipt and payment of interest was an ordinary activity conducted in the normal course of business. During the year under consideration assessee made an application to RBI to register itself as NBFC which was rejected by RBI.
- AO noticed that assessee had debited Rs. 98.60 lacs under the head interest to the income & expenditure account and out of which interest amounting to Rs. 22.51 lacs was reduced and remaining amount was added to computation of income.
- AO added amount of Rs. 22.51 lacs and treated as income from other sources in absence of any business activity and disallowed all expenditures incurred for running office and day to day functions.
- In appeal CIT (A) held that due to rejection by RBI there was no possibility of having any business in future and business of assessee was closed down permanently hence no business expenditure could be allowed.
Contention of the revenue:
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