Is Temporary discontinuance of Business allowed under Income tax act ?

As per Income tax Act, can the business be discontinued temporarily, if so please explain the legal provisions ?

 It is not necessary that a business to be in existence should have worked all the time. There may be long intervals of inactivity and a concern may still be a going concern, though it may for some time be quiet and dormant. The Hon’ble Allahabad high court in Inderchend hari ram vs CIT 23 ITR 437 observed that The mere fact that a businessman has not been able to obtain a contract and the business has for some time been in that sense dormant would not mean that it has ceased to exist. If the assessee continues to maintain an establishment and incur expenses in the expectation that work would come and the business would be successful. There is therefore, a marked distinction between “Lull in Business” and “Going out of business”. The Hon’ble Bombay high court in Hindustan chemical works ltd vs CIT 124 ITR 561 observed that, a temporary discontinuation of business may in certain circumstances give rise to an inference that a business is goint through a lean period of transition and it can be revived if proper circumstances arise and as such, it will not be a closure of business.


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