A rent agreement was made between X ltd and Y ltd 4 years back. X ltd taken the shop on rent from Y ltd for say suppose 1, 00,000 pm. In between the year there was a breach of Contract from X ltd. So Y ltd wanted X ltd to pay the rent for the remaining part of the year. The matter was under dispute since then.
X ltd showed the rent payable as contingent liability in the financials from that year.
During current year it was mutually decided between the X ltd and Y ltd that X ltd would pay the rent to Y ltd for the remaining part of the year.
Now the business of X ltd is closed. Can the X ltd claim that expense in this financial year 2013-14 as business expenditure? Would these expenses be allowed under Income Tax Act, 1961 as these expenses are prior period item? As there is no business continued can X ltd carried forward this expenditure as loss & set off against future Income.
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