Winter Ltd. was carrying more than one business activity, namely manufacturing plastic bags and trading in plastic item sales. However, the manufacturing activity was not profitable as Environment and Climate Adaptation taxes were imposed by the Government and hence, discontinued. The employees who were directly connected with this manufacturing activity were laid off and severance cost was paid to those employees. The same was claimed by Winter Ltd as revenue expenditure. The Assessing Officer disallowed the same treating it as capital expenditure, on the argument that it was incurred as a result of closure of business of Winter Ltd. Discuss what would be the nature of expenditure.

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The expenditure incurred by Winter Ltd while clousre of busines... View the full answer