M/S. PUNALUR PAPER MILLS LIMITED vs. COMMISSIONER OF INCOME TAX

JUDGMENT Vinod Chandran,J. The issue arising in this appeal has already been decided by us in a batch of appeals of the very same assessee. The question arising in this appeal by the assessee is whether the allowance under Sections 37 of the Income Tax Act, 1961 [for brevity "the Act"] were available for a company which had been defunct for almost 24 years, in the years in which there were no operations. The issue is of the business expenses claimed by the assessee for that year in which there was no use of assets by the assessee can be permitted? The Tribunal took a different stand in the present year from the earlier stand and disallowed the business expenditure claimed for allowance against the income from other sources and capital gains. We have already held that the business expenses of a particular year can be set off against any income under the various heads under Section 14 even if it is not income from profits and gains of business or profession. The fact that the assessee had not been generating any income from the business for reason of the factory having been closed down would not restrict the assessee from claiming the expenditure for the particular previous year to be set off - 3 - against the other income. Hence, we reverse the order of the Tribunal to that extent following our judgment of this date in a batch of cases in I.T.A.No.1423 of 2009 and connected cases. However, we make it clear that as held by us in the said decision, there can be no carry forward business loss set off or claimed in the relevant previous year; for the purpose of set off against the income from other source or capital gain. The assessing officer shall reconsider the issue in the light of our findings and the assessee shall establish the various amounts claimed as being rightly expended for the purpose of business.

The appeal would stand allowed, leaving the parties to suffer their respective costs. K.VINOD CHANDRAN JUDGE ASHOK MENON JUDGE - 4 -