Cessation of business after discontinuance of main undertaking bars expense deductions; post-closure asset management is not business activity.

Where an assessee's only existing commercial undertaking has been discontinued, mere retention of assets, collection of outstanding dues, investment of surplus funds, or consideration of a future venture does not amount to carrying on business. The majority held that the company's electricity business ended when the undertaking was delivered to the Government, so the later activities were only incidental to closure and not business operations. Accordingly, the assessee was treated as having ceased business during the relevant accounting years, and deductions under section 10(2)(xv) were disallowed. A dissenting view considered the investment activity and continuing dealings with assets sufficient to show that business had not wholly ended.

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Issues: Whether the assessee-company had ceased to carry on business during the relevant accounting years and was therefore not entitled to deduction of expenses under section 10(2)(xv) of the Income-tax Act, 1922.

Analysis: The majority held that the company's only business had been the working of the Lahore electricity undertaking, that this business ended when the undertaking was delivered to the Government, and that the subsequent receipt of compensation, collection of outstanding liabilities, retention of assets, or investment of surplus funds did not amount to carrying on business. The fact that the company had not gone into liquidation and had considered purchasing another concern did not establish an actual intention to resume business. The activities of valuing assets and meeting old liabilities were treated as incidental to closure, not business operations.

Conclusion: The company had ceased to carry on business during the accounting years, and the claimed deductions were not allowable; the question was answered against the assessee.

Dissenting Opinion: Bachawat J. held that the company continued to carry on business because its memorandum authorised investment activity, it had in fact dealt in investments during the relevant years, and its continuing activities with assets, deposits, and investments showed that the business was not wholly at an end.

Final Conclusion: The majority ruled that the assessee was not carrying on business in the relevant years, so the revenue's appeal succeeded and the deductions claimed were disallowed.

Ratio Decidendi: Mere retention of assets, collection of outstanding dues, investment of surplus funds, or contemplation of a new venture does not amount to carrying on business after the assessee's only existing commercial undertaking has been discontinued.

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