Is carrying on business throughout previous year necessary ?

As per Income tax Act, can the business be carried on by the assessee throughout the previous year or not  necessary , please explain the legal provisions ?

There is nothing in the Income tax Act on the basis of which it can be argued that for profit of the business to be taxable, the business must be actively carried on for the whole of the previous year, or till the end of the previous year. Under the scheme of Income tax act, whenever an assessee receives in the course of his business money or money’s worth, income embedded there in accrues or arises to him and becomes subject to an ambulatory charge. If at the end of the previous year, on making up accounts, there is no overall income, the charge does not crystallize because there is no income on which the charge of tax may settle. These views are held by two judgments of the Hon’ble Supreme court in CIT vs Bangalore transport co ltd 66ITR 373 and Turner Morrison and co ltd vs CIT 23 ITR 152. The Hon’ble Calcutta high court in Lakhsmi narayan Board mills pvt ltd vs CIT in 205 ITR 88 held that, it is not necessary that a business to be in existence should have worked all the time in the previous year.


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