Delhi ITAT Held that Investments by Holding Companies Qualify as Business Activity

 Recently, the Delhi Tribunal held that where the main object of a company is to invest in companies to act as holding company, "such activity itself constitutes the carrying on of business”. Accordingly, the Tribunal allowed deduction of the related expenses as business expenditure and further held that the resulting business losses are eligible to be set off against income assessed under the head “Income from other sources”.

The Assessee was a holding company which had made investments in its group subsidiaries which are in operating business, in line with its main objects under the Memorandum of Association. The Assessee incurred routine administrative and operational expenses (salary, legal, audit and other costs) to manage and oversee such investments. The Assessing Officer disallowed these expenses on the ground that the Assessee was not carrying on any “business” and consequently denied set-off of the resulting business loss against interest income. The disallowance was also confirmed by the CIT(A).

The Hon’ble Tribunal held that making and holding investments in operating companies for acquiring controlling interest, as per the Company’s main objects, itself constitutes a business activity. Relying on judicial precedents in the case of Tata Sons Ltd. [ITA 4041/Mum/2007] and NDTV Networks Ltd. [(2025) 173 Taxmann.com 269 (Delhi Tribunal)], the Tribunal allowed the business expenditure and directed that the resultant business loss be permitted to be set off against income assessed under other heads, including interest income.

The ruling reinforces that group company investments can itself constitute business activity, provided it can be demonstrated through the main objects of the company.