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2007 (7) TMI 351 - AT - Income TaxAllowable business expenses - Business income assessed at 'nil' - Abandoned business - HELD THAT:- As Dr. Gupta rightly contends, the assessee being an artificial juridical person, it needs to incur certain expenditure to keep itself afloat and have its continued existence. Unlike a natural person, a company can only operate through other natural persons-whether employees or others. It is not the case of the AO that the expenditure of the assessee company are excessive or unreasonable vis-a-vis its legitimate business requirements. The Hon'ble High Courts have consistently held that in the case of the corporate assessees such expenses have to be allowed as deduction irrespective of whether or not the assessee is engaged in active business and even if assessee has only passive incomes. The CIT(A) was, therefore, justified in his conclusions. That is, however, not the only reason why the disallowance made by the AO was unsustainable in law. We agree with Dr. Gupta's second line of argument as well. We find that the whole cause of action of disallowance of expenses is in the background of AO's observation that the assessee did not carry out any business transactions which at best was AO's finding about an activity of business not being functional in the relevant previous year. In our opinion, not carrying on business activity in a particular period cannot be equate with closure of business as it takes an unsustainably narrow view of the scope of cessation of a business. In the light of this legal position, it would follow that unless there is some material on record to show that the assessee has completely abandoned the share dealing business, merely because there are no business transactions in the relevant previous year cannot, be reason enough to come to the conclusion the business has come to an end. It could not thus be said; as was the case before in the case of L.VE. Vairavan Chettiar vs. CIT[1965 (4) TMI 6 - MADRAS HIGH COURT], that the assessee had "completely abandoned or closed the business forever". Unless the business is abandoned or closed and even if business is at a dormant stage waiting for proper market conditions to develop, the expenditure incurred in the course of such a business is to be allowed as deduction. For this reason also, the disallowance made by the AO was pot justified, and the CIT(A) rightly deleted the same. Ground No. 1 is thus dismissed.
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