The division bench of the Madras High Court recently opined that the assessee is entitled to set off its business loss even after a business agreement as per which only a part of the business was transferred by the assessee. The Court was considering the legality of the orders passed by the Appellate Tribunal and the Commissioner of income Tax (Appeals), who allowed the set off claim raised by the assessee.
The assessee, in the instant case is engaged in the business of providing automated teller machine (ATMs) infrastructural facilities under outsourcing. The Assessing Officer, while rejecting the return filed by the assessee for the relevant assessment year, observed that the assessee has adjusted his interest income to the business loss. It was further alleged that, in terms with an agreement entered by the assessee with another company, the assessee has transferred its business and was barred from doing business for three years. Thus, the assessment was completed by the AO by holding that in the absence of any business activity, the income in dispute cannot be treated as incidental to business and therefore, it cannot be set off against business loss.
The assessee successfully appealed the above order before the Commissioner of Income Tax (Appeals). Though the Revenue preferred an appeal before the Tribunal, it couldn’t secure any relief. The Tribunal found that “On going through the order of the Commissioner of
Income Tax (Appeals), it is very clear that the assessee has not transferred the entire undertakings but only portion of it was transferred by way of business transfer agreement and the assessee has carried on the business of job work of outsourcing of ATMs business in the financial years 2005-06 and 2006-07 and earned income of Rs.12.81 crores with the very same M/s. eFunds International P.Ltd. to whom part of the business was already sold. It was also the finding of the Commissioner of Income Tax (Appeals) that the assessee has retained portion of employees and infrastructure i.e. Fixed assets like computers, electrical equipments, furniture etc. These employees and infrastructures are capable of running the business either in the same line or in any other business”.
The Tribunal while upholding the findings of the CIT(A), observed that“during the financial year 2007-08 relevant to the assessment year under consideration, the assessee utilizing the said employees, manpower and infrastructural facilities carried out a new contract work for M/s. Cash Link Global Systems (P)Ltd. and earned business income of Rs.7,00,000/-, therefore he concluded that assessee in fact carried on the business even after the business transfer agreement in the year 2005. On going through the above order of the Commissioner of Income Tax (Appeals), we do not find any infirmity in the findings holding that assessee engaged in the business during the assessment year 2008-09 and therefore loss is to be allowed. Thus, we sustain the order of the Commissioner of Income Tax (Appeals) and reject the grounds raised by the Revenue.”Being aggrieved, the Revenue approached the High Court.
The Court categorically concurred with the findings of the Tribunal, the Court held that “The Tribunal, after going through the entire materials on record, has also categorically concurred with the views of the Commissioner of Income-Tax (Appeals)-II that the assessee was engaged in business, during the assessment year 2008-09 and thus, dismissed the appeal filed by the revenue. As we have already adverted to the details of the orders of the Tribunal, in the earlier paragraphs of this judgment, there is nothing to add, excepting to state, what is sought to be raised before us, is nothing but adjudication of The Tribunal, after going through the entire materials on record, has also categorically concurred with the views of the Commissioner of
Income-Tax (Appeals)-II that the assessee was engaged in business, during the assessment year 2008-09 and thus, dismissed the appeal filed by the revenue.As we have already adverted to the details of the orders of the Tribunal, in the earlier paragraphs of this judgment, there is nothing to add, excepting to state, what is sought to be raised before us, is nothing but adjudication of.”
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