Holding Company Expenses Allowable as Business Expenditure Even Without Operating Revenue: ITAT Delhi Ruling Explained
Background and Context
The Delhi Bench ‘E’ of the Income Tax Appellate Tribunal (ITAT) has delivered an important decision in the case of Lifestyle And Media Holding Limited Vs DCIT concerning the tax treatment of expenses incurred by a pure holding company. The ruling directly addresses whether a holding company, which primarily makes investments in group entities for strategic and controlling purposes and has no conventional operating income, can still be regarded as engaged in “business” under Section 2(13) of the Income Tax Act 1961.
The appeals before the Tribunal related to:
- ITA No. 64/Del/2019 – AY 2014-15
- ITA No. 3714/Del/2024 – AY 2015-16
- ITA No. 255/Del/2020 – AY 2016-17
The Tribunal, by a common order dated 31.12.2025, decided all three years together and held that:
- The activities of a holding company, when it makes and holds strategic investments in subsidiaries to exercise control, constitute “business” within the meaning of
Section 2(13). - Business expenditure incurred for running such holding company is allowable under
Section 37(1), even in the absence of operating revenue. - Current year business loss can be set off against income from other heads under
Section 71.
This decision reinforces the legal position that earning revenue is not a precondition for claiming genuine business expenditure, particularly in the context of holding companies.
Facts of the Case
Nature and Objects of the Assessee
The assessee, Lifestyle and Media Holding Limited (formerly NDTV Lifestyle Holdings Ltd.), is a company incorporated on 10.06.2010. As per its Memorandum of Association, the main objects include:
- To be the holding company for other entities running non-news and non-current affairs channels in the lifestyle segment (covering content such as travel, food, fashion, shopping, DIY, home and gardening, luxury, design, and wellness/health), either directly or through joint ventures or subsidiaries.
- To deal with sales, marketing and syndication of such content, directly or through joint ventures or subsidiaries.
In line with these objects, the assessee had made substantial strategic investments in group companies, including holding 92.66% shareholding in NDTV Lifestyle Limited, which was engaged in the same lifestyle media business.
Return of Income and Scrutiny
For AY 2014-15, the assessee:
- Filed its return of income on 20.09.2014, declaring a total income of Rs. 11,13,99,400/-.
- Claimed business expenditure of Rs. 1,30,69,038/-, booked under the head “Profits & gains of business or profession”, comprising routine administrative and operational expenses such as salaries, auditor’s fee, legal charges, and other overheads necessary to keep the company functioning and compliant.
The scrutiny assessment under Section 143(3) was completed on 31.08.2016.
Assessment and First Appeal Findings
Assessing Officer’s Stand
The Assessing Officer (AO) disallowed the entire business expenditure of Rs. 1,30,69,038/- and refused the set-off of business loss against income from other sources on the following core reasoning:
- The assessee had not carried out any business activity during the year.
- No income was shown under the head “Profits & gains of business or profession”.
- The activity of merely holding investments was held to not qualify as “business” as defined in
Section 2(13). - According to the AO, investments in group companies:
- If sold, would give rise to capital gains, or
- If held, might yield dividend, taxable under “Income from other sources”.
- Merely describing the activity as “business to act as a holding company” was considered insufficient to treat it as business for tax purposes.
- On that basis, the AO concluded that no deduction under
Section 37(1)could be allowed, and consequently no set-off under Section 71 was permissible.