Supreme Court Allows Business Expense Deduction for Firm in “Lull Period” Between Contracts
The Supreme Court held that a temporary lull in business activities does not amount to cessation of business. The absence of a permanent establishment or a subsisting contract is not determinative; continuous business efforts, such as correspondence and bidding, suffice to constitute "carrying on business" for claiming deductions under Sections 37 and 71 and carry-forward of depreciation under Section 32(2) of the Income Tax Act.
Facts Of The Case:
The appellant, Pride Foramer S.A., a French non-resident company engaged in oil drilling, was awarded a 10-year contract by ONGC in 1983, which concluded in 1993. A subsequent drilling contract was awarded only in October 1998, formalized in January 1999. During the interregnum assessment years (1996-97, 1997-98, 1999-2000), the comp...