business loss/income from house property

[satinder chadha]

A private ltd company was incorporated in the year 1996 having main objects as consultancy in shares and property, trading in shares, purchasing property and giving it on rent.

Company traded in stocks and from the profit purchased property in the year 2000 which was given on rent in the year 2004 .In the year 2004 company started consultany business and stopped business in shares.Every year there was rent as well as consuting income .But in the year 2008-2009 company didnot have any consultany income but there was expenditure with respect to the consultancy business. Now the ITO  that he will give only 30 % dedution with respect to income from house property and no dedution with respect to expenditure incurred in consultancy as there was no business  income in  it.

 Is it correct ?

 If not can some able expert throw some light on it with reference to decided case law .

Thanks a lot.

[CAGOPALJI AGRAWAL]

For claiming the exenses, it is not necessary that there must be some business income. Of course, the expenses must be done wholly and exclusively in respect of the business. It has to be demanstrated by positive evidences that the assessee had done all efforts to earn income and the expenses are genuine and not bogus.

[sanjeev bajaj]

I agree with the point of view that for claiming expenses the business must be in existence although it is not necessary you receive any income during the year.

Further, rent income in your case is business income as the main object of the company includes renting of property.

sanjeev bajaj

AI Summary

Deductibility of business expenses: costs wholly and exclusively for an existing business may be claimed despite no receipts in the year. Expenditures are deductible if incurred wholly and exclusively for the purposes of a business that is in existence, even when that business produces no receipts in the year; tax authorities may require evidence to show the expenses are genuine and not bogus. Where a company's objects include renting property, rental receipts may be treated as business income, which influences the allocation and deductibility of related expenses.