DEPUTY COMMISSIONER OF INCOME TAX-CENTRAL CIRCLE-1(2), BENGALURU V. MANIPAL GLOBAL EDUCATION SERVICES PVT.LTD. (MERGED WITH MANIPAL EDUCATION AND MEDICAL GROUP (I) PVT , BANGALORE

ITA 2149/BANG/2025

AI Insights

The case involves the Deputy Commissioner of Income Tax (DCIT) appealing against the order of the Commissioner of Income Tax (Appeals) which had deleted the addition of 902 lakhs made by the assessing officer. The dispute centered on the assessment of losses from discontinued operations by Manipal Global Education Services Pvt. Ltd., which had undergone a slump sale. The assessing officer had disallowed certain losses claimed by the assessee, citing insufficient substantiation of the expenses. However, the CIT(A) found the assessee's claims valid, leading to the DCIT's appeal to the Income Tax Appellate Tribunal.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 846307 (ITAT-BANGALORE)
• Duration Of Justice: 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2026
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Bangalore
• Assessment Year: 2021-2022
• Appeal Filed On: 29-09-2025
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MUTHUSHANKAR
• Assessee Lawyers: S. K. TULSIYAN
• Keywords: Fair market value; Valuation report
• Section: 37; 115JB

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH : BANGALORE BEFORE SHRI PRASHANT MAHARISHI, VICE – PRESIDENT AND SHRI SOUNDARARAJAN K., JUDICIAL MEMBER ITA No. 2149/Bang/2025 Assessment Year : 2021-22 The DCIT, Circle - 1(2), Bangalore. Vs. M/s. Manipal Global Education Services Pvt. Ltd., (merged with Manipal Education and medical group (I) Pvt) Prestige Emerald, 5th floor, No. 4, Madras Bank Road, Bangalore Bazaar S.O., Bengaluru North, Bengaluru – 560 001. APPELLANT RESPONDENT Assessee by : Shri S.K. Tulsiyan, Advocate Revenue by : Shri Muthu Shankar, CIT-DR Date of Hearing : 03-02-2026 Date of Pronouncement : 25-03-2026 ORDER PER PRASHANT MAHARISHI, VICE – PRESIDENT 1. Captioned appeal for assessment year 2021 – 21 is filed by The Deputy Commissioner of Income Tax – Central Circle – 1 (2), Bengaluru [ the ld AO] against the appellate order passed by The Commissioner of Income Tax (Appeals) – 15 Bangalore [The ld. CIT – A] dated 24 July 2025 wherein the appeal filed by the assessee against the assessment order passed under section 143 (3) of The Income Tax Act (The Act) dated 30 December 2022 assessing the total loss of the assessee at ₹ 232,161,791/–, was partly allowed. Printed from counselvise.com ITA No. 2149/Bang/2025 DCIT V Manipal Global Education Pvt Ltd A Y 2021-22 Page 2 of 8 2. The learned AO is aggrieved with the same and has raised following grounds of appeal: –. i. Whether the learned CIT – A order in deleting the addition of ₹ 902 lakhs made in the assessment order in not appreciating the fact that the assessee failed to substantiate the claim of expenses with proper evidence. ii. Whether the learned CIT – A order in not appreciating the fact that slump sale consideration was decided based on valuer's report and non-submission of common expenses to the valuer for making valuation is not justified. iii. whether the learned CIT – A order in not tax appreciating the fact that the expenses in the discontinued business has already been allowed on pro rata basis based on the expenses reported till November 2022 the valuer. 3. Brief facts of the case shows that the assessee is a company, filed its return of income on 15 March 2022 declaring business loss of ₹ 345,321,163/- and income from other sources of ₹ 33,376,556/- under normal provisions of computation and Rs. Nil under section 115JB of The Act. The return of the assessee was picked up for scrutiny and notice under section 143 (2) of the act was issued on 27th of June 2022. 4. During assessment proceedings, the learned assessing officer noted that there is an excess loss claimed by the assessee from discontinued operation. According to the assessee as per the financial statement, loss from discontinued operation from one of its business India segments which was sold through slump sale and in January 2021 is ₹ 13.02 crores. As per the valuation report the loss up to 30 November 2020 is reported at ₹ 3.19 crores. Assessee was asked to substantiate that how in the next 2 months the loss has increased. The assessee replied that in the valuation report, common costs were not allocated and furnished breakup of such excess cost which was considered in the year end financials. Assessee Printed from counselvise.com ITA No. 2149/Bang/2025 DCIT V Manipal Global Education Pvt Ltd A Y 2021-22 Page 3 of 8 submitted the details of expenses and submitted that all the expenses claimed by the assessee are vouched and properly supported by the necessary evidence. The learned assessing officer noted that slump sale consideration is arrived at using valuation report. Therefore, the financial statements provided to the valuer are expected to be precise and accurate. Thus, the explanation of the assessee is not satisfactory and therefore the loss is allowed only on proportionate basis at Rs. 4 crores till January 2021. Thus, the learned assessing officer disallowed excess loss claimed from discontinued operation of ₹ 902 lakhs. Consequently, assessment order was passed on 30 December 2022 under section 143 (3) of the Act determining t. income of the assessee at ₹ 232,161,791/- against the returned loss of ₹ 331,613,076/-. 5. Aggrieved with the same the assessee preferred an appeal before the learned CIT – A. The learned CIT – A passed the appellate order on 24 July 2025 wherein as per paragraph No. 6.3 of the order he held that the loss figure derived by the assessee of ₹ 13.03 crores is correct and the disallowance made by the learned assessing officer of ₹ 9.02 crores is incorrect. Thus, he deleted the addition and allowed the appeal of the assessee. 6. The learned AO aggrieved with the same is in appeal before us the learned CIT DR vehemently supported the order of the learned assessing officer and reiterated the reasons given by the AO. 7. The learned authorised representative vehemently supported the order of the learned CIT – A. He referred to the financial statements of the assessee company audited by BSR and Co LLP. He referred to statement of profit and loss for the year ended on 31st of March 2021 and referred to the fact that loss from discontinued operations is disclosed at a loss of ₹ 13.03 crores. Gain from sale of business is shown at ₹ 142.46 crores and Printed from counselvise.com ITA No. 2149/Bang/2025 DCIT V Manipal Global Education Pvt Ltd A Y 2021-22 Page 4 of 8 therefore the assessee has shown profit from discontinued operations after tax of ₹ 129.43 crores. He further referred to the notes to standalone financial statement at serial No. 2 wherein the policy of discontinued operation is disclosed. He further referred to note No. 43 of the annual accounts wherein the assessee has disclosed the complete amount of impact on the financial statement of discontinued business of assessee. He therefore submitted that the assessee has sold business and none of the expenses are unvouched or unsupported. He further stated that assessee has disclosed the gain from the sale of subsidiary and business segment of ₹ 140.82 crores which has been recognised separately and part of discontinued operation in the statement of profit and loss account. Thus, according to him there is no infirmity in the order of the learned CIT – A in deleting the addition of ₹ 9.02 crores. 8. The learned departmental representative in rejoinder referred to the auditor's report and stated that though there is a profit of Rs. 140 crores on sale of the business but here the issue is with respect to the claim of expenditure of ₹ 13 crores which has been debited in the books of accounts of the assessee on the face of it in statement of profit and loss statement. It was further stated that the learned assessing officer has proportionately allowed the claim of the assessee of Rs 4 Crores. It was therefore stated that the appeal of the learned AO may be allowed. 9. We have carefully considered the rival contention and perused the orders of the learned lower authorities. Fact shows that the assessee company has entered into an agreement on 23 January 2021 to sell its subsidiary and one of its businesses with India segment (EdTech) U next learning solutions private limited for a consideration of ₹ 227.24 crores. The sole object of a strategic decision to place greater focus on the company's key competence that is business of providing campus-based education and training. The board has approved the transfer of the rights effective Printed from counselvise.com ITA No. 2149/Bang/2025 DCIT V Manipal Global Education Pvt Ltd A Y 2021-22 Page 5 of 8 January 1, 2021, and accordingly the accounting of the transaction has been arrived at effective the same date. The interest of the assessee was transferred upon completion of certain conditions, on January 29, 2021, wherein the company received 6% optionally convertible debentures in Unext for the sale consideration of ₹ 227.24 crores. The debenture and accumulated interest are redeemable at any time in the next five years at a face value of ₹ 10 with mutual consent of the parties. At the end of the five years, any optionally convertible debenture and accumulated interest that have not been redeemed will automatically converted to equity shares of that company at higher of ₹ 10 per share is all the fair market value of Unext at that time of conversion. 10. On this transaction, assessee has earned again the sale of subsidiary and business segment of ₹ 140.82 crores which has been recognised separately as part of discontinued operation in the statement of profit and loss. The comparative statement of profit and loss has also been presented to show that the discontinued operation separately from continuing operations. The assessee has also shown the result of discontinued operation wherein the revenue of ₹ 12.29 crores and the expenses of ₹ 25.32 crores were recorded. Therefore, there was a loss before tax from discontinued operation of ₹ 13.03 Crores. This loss was also disclosed in the statement of profit and loss account. The learned assessing officer has treated only Rs. 4 crores as proportionate deduction of loss at up to January 2021. He rejected the explanation of the assessee that increase in the expenses has been primarily on account of the common expenses which were incurred during the period April 2020 to December 2020. These expenses were appropriated between the continuing operation and discontinuing operation and same were considered in the financial statements. The learned AO failed to appreciate the explanation of the assessee. None of the expenditure debited by the assessee was found to be unvouched or unsupported. Further the disclosure of the continuing operation and discontinuing operation results Printed from counselvise.com ITA No. 2149/Bang/2025 DCIT V Manipal Global Education Pvt Ltd A Y 2021-22 Page 6 of 8 is as per the relevant accounting standard. Thus, the expenses shown in discontinued operation segment is also incurred wholly and exclusively for the purposes of the business. The valuation report is for the purposes of computing capital gain and does not determine the allowability or otherwise of the expenditure which is solely governed by the provisions of section 37 (1) of the Act. It is not the case of the ld AO that expenses are not incurred for the purposes of the business. Thus, the ld AO failed to understand the accounting standards where these provision of bifurcation financial results of continuing and discontinuing operation is made, so that stakeholder can understand the impact of the transaction of discontinuing cooperation of the financial affairs of the company. The learned CIT – A found that that there is no reason given by the learned assessing officer on the veracity or genuineness of the expenses claimed for discontinued business unit and did not give any reason as to why the loss figure shown in the audited financial statement should not be accepted in absence of any other adverse material. 11. In the annual accounts of the assessee at paragraph No. 43, this transaction is disclosed as under: - Printed from counselvise.com ITA No. 2149/Bang/2025 DCIT V Manipal Global Education Pvt Ltd A Y 2021-22 Page 7 of 8 12. On careful consideration of the annual accounts, the explanation given by the assessee, the disclosure made by the assessee in the notes on accounts, it is apparent that disallowance of ₹ 902 lakhs made by the learned assessing officer and deleted by the learned CIT – A would not have been added to the total income of the assessee. The assessee has substantiated the claim of the expenses with proper evidence. Further the slump sale consideration was shown by the assessee in the computation of total capital gain income which has nothing to do with the common expenses which are debited by the assessee in its annual accounts which are otherwise allowable u/s 37 (1) of the Act. Thus the action of the learned assessing Officer allowing only the proportionate expenditure is not correct. Thus, we confirm the appellate order passed by the ld CIT (A) and the ld AO is directed to delete the disallowance. 13. In the result the appeal of the learned AO is dismissed. Order pronounced in the open court on 25th March, 2026. Sd/- (SOUNDARARAJAN K.,) Sd/- (PRASHANT MAHARISHI) JUDICIAL MEMBER VICE-PRESIDENT Bangalore, Dated, the 25th March, 2026. Printed from counselvise.com ITA No. 2149/Bang/2025 DCIT V Manipal Global Education Pvt Ltd A Y 2021-22 Page 8 of 8 *TNTS* Copy to: 1. Appellant 2. Respondent 3. CIT 4. DR, ITAT, Bangalore 5. CIT(A) By order Assistant Registrar, ITAT, Bangalore Printed from counselvise.com "