Liquidation Expenses

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Dinesh Singh (Querist)
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22 August 2020 Please help me in solving this query.

A private limited company is being voluntarily liquidated. The I.T returns for the FY 2019-20 needs to be filed.

It has a business loss. The reason for business loss is the liquidation expenses. Almost 90% of the business loss is due to liquidation expenses (like remuneration paid to liquidator etc.).

The company has also got some Foreign Exchange gain during the FY 2019-20 which is part of business loss.

My questions are as follows:

a. Whether the liquidation expenses are allowable as a business expenses?

b. Whether business loss arising from the liquidation expenses can be set off with the Foreign Exchange gain?

c. Also do let me know if there are any provisions and case laws in this regard.

Thanks in advance.

KAVIRAJA ADDANGADI

KAVIRAJA ADDANGADI (Expert)
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22 August 2020 u/s 57(iii) of the IT Act, 1961, the Supreme Court held that "the next submission of learned counsel for the assessee was that, in the course of the effecting the winding up of the assessee-company, the liquidator has been incurring expenses such as salaries, legal fees, travelling expenses and other liquidation expenses and that these expenses are allowable as deduction from income earned by way of Gain from Foreign Exchange

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KAVIRAJA ADDANGADI

KAVIRAJA ADDANGADI (Expert)
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22 August 2020 Supreme Court in Vijay Laxmi Sugar Mills Ltd. vs. CIT decision given allowable expenses set off interest Income on FD

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Dinesh Singh

Dinesh Singh (Querist)
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23 August 2020 The appeal was dismissed in this case, i.e. it does not allow the expenses to be set off against interest income on FD Read full judgement.

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