14 November 2008
A closely-held company was engaged in the business of financing and trading in cloth. However, no business activities were carried out during the year (except investments in F.D.).
Income by way of dividend (exempt) and interest on FDR (income from other sources).
Whether the expenses incurred during the year (for existence of the company) such as audit fees, filing fees, accounting charges, bank charges etc. can be claimed to arrive at business loss?
Can such loss be set-off against income from other sources (interest on FDR)?
Can interest on FDR be treated as business income, on the grounds that the company is engaged in the business of financing?
14 November 2008
You may have to bifurcate the expenses between those related to earning exempted income(dividends) and those relating to other income. The expenses relating to exempted income has to be claimed only against that income.
17 November 2008
The expenses which have incurred before starting of commercial production is to be treated as pre operative expenses which is a capital in nature. The eyes of law it is not an allowable expenditure.
CAclubindia
