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TMI Blog1980 (8) TMI 81X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowance of Rs. 54,206 including interest of Rs. 48,374 paid to the Canara Bank on the borrowings from them from the income of the firm was correct and whether at least to the extent of the income earned, the expenditure including interest should not have been allowed ? (2) Whether, on the facts and in the circumstances of the case, the bank was not carrying on business and whether it was not entitled to carry forward the loss ? " The assessee-The S.P.V. Bank Ltd.-was carrying on business in banking till April 27, 1963, on which date the banking business of the assessee was taken over by M/s. Canara Bank Ltd. All the business assets and liabilities of the assessee were not taken over but only certain selected assets and liabilities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entitled to have the interest payment made to the Canara Bank allowed in full and it was also entitled to the benefit of carrying forward the consequential loss. The assessee's appeal was accordingly allowed by the AAC. The department took up the matter in further appeal before the Tribunal. The Tribunal held that in merely taking steps to collect the outstanding arrears of advances the assessee was not carrying on any business activity and hence the assessee was not eligible for the deduction claimed by way of business expenditure. In this view, the Tribunal allowed the department's appeal and restored the order of the ITO. I.T.R. No. 20 of 1978 For the succeeding assessment year, 1975-76 the assessee put forward an identical claim for d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... them during the period when the assessee was carrying on the business of banking prior to the date of take over and to utilise the amounts so collected to reduce the liability due to the Canara Bank. The short point to be decided is whether in taking such steps for collection of old outstandings the assessee could be said to have been carrying on business so as to be entitled to claim a deduction of the amounts paid by way of interest to the Canara Bank Ltd. as expenditure laid out or expended wholly and exclusively for the purpose of the business and to carry forward the resultant loss. In order to sustain a claim for deduction by way of business expenditure the expenditure must have been incurred for the purpose of a business which was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (5), as long as her trade debts remain undischarged, there would seem to be presumption that a company continues to carry on business as long as it is engaged in collecting debts periodically falling due to it in the course of its former business'. We are unable to hold that Lord Sumner intended to lay down that a business which is closed down is deemed to be carried on so long as its outstandings are being collected. South Behar Railway's case [1925] 12 TC 657 (HL), was concerned with a financing company whose only activity after the finances had been furnished was to receive from the Government by way of profits of the financing activity, earlier certain proportion of the net earnings of the undertaking financed which was being managed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0, 509 may also be usefully extracted : " Counsel for the department has further urged that inasmuch as outstandings of the money-lending business were realised by the executors, they should be taken to have carried on the business of money-lending too. It is, however, conceded by him that beyond realising the outstanding debts, nothing further was done by the executors and no new loans were advanced. In these circumstances, we do not consider that it can be reasonably argued that in merely collecting the outstanding dues, any business on money-lending was being carried on by the executors. The conclusion that emerges from the foregoing discussion is that the Tribunal was perfectly right in holding that during the accounting periods rel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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