|QUERY:||Mr. A has taken over the running business of Mr. B with all its assets and liabilities w.e.f. April 1,2014. He makes a cash payment of Rs. 40,000/- on June 1, 2014 to one of the trade creditors of the predecessor, Mr. B., deduction in respect of which obviously not claimed by the Mr. A. Can there be any disallowance in the hands of Mr. A in the assessment year 2015-16?|
|ANSWER:||Click here to read the full answer of the expert|
|EXPERT:||CA. H. N. Motiwalla|
|CATCH WORDS:||Expenses or payments not deductible - Cash payments exceeding prescribed limits -Disallowance u/s. 40A(3) in case of succession of business|
The requisites of succession, as the Supreme Court laid down in CIT v. K. H. Chambers [55 ITR 674] are:
i) There shall be a change of ownership.
ii) The integrity of the business shall remain – the whole business should devolve upon the successor.
iii) The identity and continuity of the business should be substantially preserved. The same business shall be carried on by the person succeeding.