ACIT, CHENNAI V. ISC Investments & Finance Pvt. Ltd., CHENNAI

ITA 1987/CHNY/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96303 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 25-08-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 21-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: T BANUSEKAR
• Keywords: Business income; Depreciation; Business expenditure
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , C B ENCH, CHENNAI . , ! # $ , % & BEFORE SHRI A.MOHAN ALANKAMONY ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./I.T.A.NO .1987/MDS/2014 ( / ASSESSMENT YEAR: 2008-09) ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-II(3), CHENNAI. VS M/S. ISC INVESTMENTS & FINANCE P. LTD. 5, MEZZANINE FLOOR,THAPAR HOUSE,37, MONTEITH ROAD, CHENNAI-600 008. PAN: AAACI6337B ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. A.V.SREEKANTH, JCIT /RESPONDENT BY : MR. T.BANUSEKAR, C.A. /DATE OF HEARING : 25 TH AUGUST, 2015 /DATE OF PRONOUNCEMENT : 28 TH OCTOBER, 2015 / O R D E R PER CHALLA NAGENDRA PRASAD, JM: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-II, CHENNA I DATED 30.01.2014 FOR THE ASSESSMENT YEAR 2008-09. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 2. THE CIT(A) ERRED IN ALLOWING THE ASSESSEE'S AP PEAL BY HOLDING THAT THE ASSESSEE HAS DERIVED BUSINESS INCO ME AND HAS INCURRED ADMINISTRATIVE EXPENSES. 2.1 THE ID.CIT(A) FAILED TO APPRECIATE THAT THE INCOME DERIVED BY THE ASSESSEE FROM ITS BUSINESS OPERATIO NS IS ONLY RS.7,00,000/- THAT TOO RECEIVED FROM ITS SISTE R CONCERN, UPON WHICH THE EXPENSES TO THE EXTENT OF RS.3,01,39 ,668/- WAS CLAIMED AS EXPENSES. WHEN THERE WAS NO LIVE BUSINESS ACTIVITY DURING THE PERIOD UNDER CONSIDERA TION, 2 ITA NO.1987/MDS/2014 HUGE EXPENSES CLAIMED BY THE ASSESSEE CANNOT BE ALLOWED. 2.1 THE ID. CIT(A) ERRED IN HOLDING THAT THE ASSES SEE HAS THE RIGHT TO CLAIM ALL THE EXPENSES UNDER THE HEAD 'INCOME FROM BUSINESS. 2.2 THE ID. CIT(A) FAILED TO APPRECIATE THAT THE A SSESSEE HAS SOLD ITS BUSINESS OF OUTSOURCING ATMS LOCK, STO CK AND BARREL BY WAY OF SLUMP SALE IN THE YEAR 2005-06. 2.3 THE ID. CIT(A) OUGHT TO HAVE SEEN THAT THE OFFE RING OF 'BUSINESS INCOME' OF RS.7 LAKHS AGAINST WHICH EXPEN DITURE OF RS.2,93,09,185/- HAS BEEN CLAIMED IS ONLY TO AVO ID PAYMENT OF TAX ON ITS INCOME FROM OTHER SOURCES (IN TEREST INCOME) OF RS.2,56,64,169/-. 2.4 THE ID. CIT(A) FAILED TO NOTE THAT EVEN THE ALL EGED BUSINESS RECEIPT OF RS.7,00,000/- WAS FROM ITS OWN GROUP CONCERN, M/S.CASH LINK GLOBAL SYSTEMS (P) LTD. WHIC H CASTS ASPIRATIONS ON THE BUSINESS RECEIPT, PARTICULARLY I N THE LIGHT OF BUSINESS EXPENDITURE CLAIM OF RS.2,93,09, 185/-. 2.5 THE ID.CIT(A) OUGHT TO HAVE APPRECIATED THAT TH E ASSESSEE WAS BARRED TO CARRY ON ITS LINE OF BUSINES S FOR A PERIOD OF 3 YEARS HAVING REGARD TO ITS MEMORANDUM OF AGREEMENT, THE ASSESSEE COMPANY CANNOT CARRYON A NY OTHER BUSINESS. 2.6 THE ID. CIT(A) FAILED TO APPRECIATE THAT WHEN T HE EXPENSES CLAIMED WERE NOT RELATED TO THE BUSINESS T HAT WAS IN EXISTENCE, THE CLAIM OF SUCH EXPENSES HAS TO BE DISALLOWED AS HAS BEEN RIGHTLY DONE BY THE ASSESSIN G OFFICER. 2.7 THE ID CIT(A) FAILED TO APPRECIATE THAT WHILE C LAIMING SUCH HUGE EXPENSES IN THE ABSENCE OF ANY LIVE BUSIN ESS ACTIVITY, THE ASSESSEE FAILED TO PROVE BEYOND DOUBT THE NEED FOR SUCH EXPENSES WITH REGARD TO OPERATION AND ADMINISTRATIVE EXPENSES BEFORE THE ASSESSING OFFICE R. 3. BRIEF FACTS ARE THAT THE ASSESSEE COMPANY IS ENG AGED IN THE BUSINESS OF PROVIDING AUTOMATED TELLER MACHI NE (ATMS) INFRASTRUCTURAL FACILITIES UNDER OUTSOURCING, FILED ITS RETURN OF 3 ITA NO.1987/MDS/2014 INCOME ON 25.09.2008 DECLARING LOSS OF ` 29,45,617/-. THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) ON 24.12.2010 DETERMINING THE INCOME OF THE ASSESSEE AT ` 2,56,64,169/-. THE ASSESSING OFFICER NOTICED THAT A SSESSEE HAS RECEIVED INTEREST INCOME OF ` 2,56,64,169/- AND THIS INTEREST INCOME HAS BEEN ADJUSTED AGAINST BUSINESS LOSS OF ` 2,86,09,185/- APART FROM SHOWING ` 7,00,000/- AS INCOME DURING THIS ASSESSMENT YEAR. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE HAS TRANSFERRED ITS BUSI NESS IN THE FINANCIAL YEAR 2004-05 TO EFUNDS INTERNATIONAL P.LT D. THROUGH BUSINESS TRANSFER AGREEMENT AND BY VIRTUE OF THIS A GREEMENT, THE ASSESSEE SOLD ITS BUSINESS IN THE YEAR 2005 AND ASSESSEE WAS BARRED FROM ENTERING INTO SAME LINE OF BUSINESS FOR THREE YEARS. IN THE ABSENCE OF ANY BUS INESS ACTIVITY DURING THE YEAR, THE EXPENSES CLAIMED BY THE ASSESSEE WERE NOT PRIMA-FACIE INCIDENTAL TO BUSINES S, THEREFORE, INTEREST EXPENSES CANNOT BE ALLOWED TO S ET OFF AGAINST BUSINESS LOSSES. THE ASSESSEE PREFERRED AP PEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) CONTENDING THAT ASSESSEE HAS NOT SOLD ITS ENTIRE UN DERTAKING AS LOCK-STOCK-BARREL, AS OBSERVED BY THE ASSESSING OFFICER. 4 ITA NO.1987/MDS/2014 THE ASSESSEE CONTENDED THAT IT HAS TRANSFERRED ONLY ITS OUTSOURCING OF ATMS BUSINESS TO M/S. EFUNDS INTER NATIONAL P.LTD. IT WAS CONTENDED BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) THAT BUSINESS CURRENTLY BEING CARRIED ON BY THE ASSESSEE WAS ON SUN-OASIS PLATFORM AND THIS BUSINES S HAD BEEN SOLD ON SLUMP SALE BASIS WHILE RETAINING THE T ANDEM- BASE 24 PLATFORM RELATED BUSINESS WITH THE ASSESSE E. THUS, IT WAS CONTENDED THAT ASSESSEE HAS NOT SOLD ITS ENT IRE UNDERTAKING SO AS TO SAY THAT IT IS A SLUMP SALE. I T WAS FURTHER CONTENDED BEFORE THE COMMISSIONER OF INCOME TAX (AP PEALS) THAT EVEN AS PER AGREEMENT, IT IS NOT RESTRICTED TO CARRY ON VARIOUS BUSINESSES. IT WAS FURTHER SUBMITTED BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) THAT ASSESSEE IN FACT CARRIED ON JOB WORK OF OUTSOURCING OF ATMS BUSINESS DURING THE FINANCIAL YEAR 2005-06 AND 2006-07 FOR EFUNDS INTERNATIONAL P.LTD. AND EARNED SUBSTANTIAL REVENUE OF ` 12.81 CRORES AS BUSINESS INCOME, THOUGH BUSINESS TRANSFE R AGREEMENT WAS ENTERED INTO IN THE FINANCIAL YEAR 20 04-05 WITH M/S. EFUNDS INTERNATIONAL P. LTD. IT WAS FURTHER CO NTENDED THAT DURING THE FINANCIAL YEAR 2007-08 RELEVANT TO ASSESSMENT YEAR 2008-09, IT HAD CARRIED ON JOB WORK FOR ITS S ISTER 5 ITA NO.1987/MDS/2014 CONCERNS AND EARNED INCOME OF ` 7,00,000/-. THEREFORE, IT DOES NOT MEAN THAT ASSESSEE HAS NOT CARRIED ON ANY BUSINESS AT ALL DURING THE ASSESSMENT YEAR 2008-09. CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE CONTENTIONS RAISED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER, THE COMMISSIONER OF INCOME TAX (APPEALS) ALLOWED THE CLAIM OF THE ASSESSEE IN SETT ING OFF THE INCOME AGAINST BUSINESS LOSS HOLDING THAT ASSESSEE CARRIED ON BUSINESS ACTIVITIES DURING THE ASSESSMENT YEAR 2 008-09 UNDER CONSIDERATION AGAINST WHICH THE REVENUE IS I N APPEAL BEFORE US. 4. DEPARTMENTAL REPRESENTATIVE, REFERRING TO THE ASSESSMENT ORDER, SUBMITS THAT THERE IS NO BUSINE SS ACTIVITY CARRIED ON BY THE ASSESSEE DURING THE ASSESSMENT YE AR UNDER CONSIDERATION. THOUGH THE ASSESSEE HAD SHOWN ` 7,00,000/- AS INCOME EARNED FROM ITS SISTER CONCERN S FOR RUNNING THE BUSINESS, SINCE THE ENTIRE BUSINESS HAD BEEN TRANSFERRED IN THE FINANCIAL YEAR 2004-05 AS SLUMP SALE, IN THE ABSENCE OF ANY BUSINESS ACTIVITY, THE LOSS CANN OT BE SET OFF AGAINST THE INTEREST INCOME THE ASSESSING OFFIC ER HAS RIGHTLY ASSESSED THE INTEREST UNDER THE HEAD INCOME FROM 6 ITA NO.1987/MDS/2014 OTHER SOURCES. HE VEHEMENTLY SUPPORTS THE ORDER OF THE ASSESSING OFFICER. 5. COUNSEL FOR THE ASSESSEE REFERRING TO PAGE 18 OF THE PAPER BOOK I.E. BUSINESS TRANSFER AGREEMENT SUBMITS THAT THE AGREEMENT WAS ENTERED INTO ON 31 ST MARCH, 2005 BY THE ASSESSEE COMPANY AND M/S. EFUNDS INTERNATIONAL P.LT D. FOR TRANSFER OF SUN-OASIS PLATFORM BUSINESS. COUNSEL FO R THE ASSESSEE FURTHER SUBMITS THAT THE TANDEM-BASE 24 PL ATFORM RELATED BUSINESS WAS NOT SOLD BY THE ASSESSEE. COUN SEL SUBMITS THAT THE ASSESSEE RETAINED PORTION OF EMPLO YEES AND INFRASTRUCTURE, FIXED ASSETS LIKE COMPUTER, FURNITU RE ETC. AND CARRIED ON BUSINESS OF TANDEM-BASE 24 PLATFORM RELA TED BUSINESS. THE COUNSEL FOR THE ASSESSEE FURTHER SUBM ITS THAT IN FACT ASSESSEE CARRIED ON JOB WORK OF OUTSOURCING OF ATM BUSINESS FOR THE VERY SAME M/S. EFUNDS INTERNATIONA L P.LTD. DURING THE FINANCIAL YEARS 2005-06 & 2006-07 AND EA RNED REVENUE OF ABOUT ` 12.81 CRORES, EVEN THOUGH THE ASSESSEE ENTERED INTO BUSINESS TRANSFER AGREEMENT IN THE FIN ANCIAL YEAR 2004-05 ITSELF. HE SUBMITS THAT THIS CLEARLY SHOWS THAT ASSESSEE HAS NOT SOLD ITS ENTIRE UNDERTAKING SO AS TO TREAT IT 7 ITA NO.1987/MDS/2014 AS A SLUMP SALE. REFERRING TO THE AGREEMENT, HE FUR THER SUBMITS THAT ASSESSEE IS NOT PREVENTED FROM DOING VARIOUS BUSINESSES REFERRED TO IN THE AGREEMENT WHICH ARE A S UNDER:- III) FOR THE AVOIDANCE OF DOUBT, IT IS HEREBY AGR EED THAT NOTHING CONTAINED IN THIS AGREEMENT SHALL PREVENT OR RESTRICT ISC, CAPVEN OR THEIR ASSOCIATES, AFFILIATES OR OWNERS FROM CARRYING ON ANY OR ALL OF THE FOLLOW ING ACTIVITIES: (A) SALE, LEASE OR SALE ON HIRE-PURCHASE OF ATMS, ATM-RELATED HARDWARE AND OPERATING SOFTWARE; SECURI TY PRODUCTS; (B) THE SALE, LEASE OR SALE ON HIRE-PURCHASE OF PO ? TERMINALS, RELATED HARDWARE AND OPERATING SOFTWARE; PROVISION OF! A TM MAINTENANCE, HEALTH MONITORING AND CONTENT MANAGEMENT EXCEPT THAT THESE SERVICES MAY NOT BE SO LICITED FOR A TMS CONTRACTED WITH 1SC PRIOR TO CLOSING, OR FOR TH OSE ATMS ADDED ON TO THOSE EXISTING CONTRACTS POST-CLOSING O R FROM A CUSTOMER OF LSC AS OF CLOSING, WITHOUT CONSENT OF P URCHASER; (C) MAINTENANCE SERVICES FOR POS TERMINALS AND RELATED HARDWARE AND SOFTWARE; (D) SALE AND SUPPORT OF 'PLASTIC CARDS (BUT NOT INCLUDING THEIR PRODUCTION AND ISSUANCE UNDER OUTSO URCING ARRANGEMENTS AS PERFORMED IN THE BUSINESS); DEVELOP MENT, SALE AND/ OR LICENSING OF HMA DATA / HMA STARWARE'S PROP RIETARY SOFTWARE; (E) THE BUSINESS CURRENTLY CARRIED ON BY HMA STARWARE OF LICENSING AND SUPPORT OF OASIS IST SWIT CHES, CARD RELATED SOLUTIONS AND OTHER SUCH BUSINESS; AND (F) ANY OTHER BUSINESS WHETHER OR NOT RELATED TO T HE FOREGOING, WHICH WAS NOT PART OF 1SC TRANSFERRED BU SINESS OR AGREED TO BE EXTENSIONS OF THE BUSINESS AS OF CLOSI NG. (IV) DURING THE RESTRICTED PERIOD, PURCHASER SHALL OFFER TO ISC OR ITS AFFILIATES THE RIGHTS OF FIRST REFUSAL F OR SECOND LINE MAINTENANCE (SLM) FOR ATMS IMPLEMENTED OR UNDER CON TRACT FOR FUTURE IMPLEMENTATION ON AN OUTSOURCING BASIS UNDER ISC CONTRACTS WITH CUSTOMERS AS OF THE GO SING DATE, AN D FOR A TMS SUPPLIED BY ISC OR ITS AFFILIATES IN THE FUTU RE TO PURCHASER OR ANY OTHER AFFILIATE OF THE PURCHASER IN INDIA IN THE EVENT OF SUCH ENTITY SEEKING TO ENGAGE A THIRD PARTY SERVICE PROVIDER FOR SUCH SERVICE. 'PURCHASER SHALL ALSO OFFER TO ISC OR ITS AFFILIATES THE RIGHTS OF FIRST REFUSAL FOR THE SUPPLY OF TRITON AU TOMATED TELLER MACHINES AND CASH DISPENSERS AND OTHER SELF SERVICE DEVICES 8 ITA NO.1987/MDS/2014 WHERE THESE ARE QUALIFIED FOR CONSIDERATION PROVIDE D THAT 1SC OR ITS AFFILIATE IS AN AUTHORIZED DISTRIBUTION CHANNEL FOR THOSE DEVICES AT THE TIME OF THE TRANSACTION. (V) RECIPROCALLY, 1SC AND ITS AFFILIATES SHALL, DUR ING THE RESTRICTED PERIOD, PROVIDE THE PURCHASER WITH A RIG HT OF FIRST REFUSAL FOR THIRD PARTY PROCESSING AND NETWORKING S OLUTIONS THAT MAY BE REQUIRED BY THEM IN RELATION TO THE DEPLOYMENT OF ATMS, CASH DISPENSERS, SELF-SERVICE TERMINALS, PAS TERMINALS OR OTHER ELECTRONIC TRANSACTION DEVICES, AND FOR THE PRODUCT ION AND SUPPLY OF PLASTIC CARDS AS MAY .BE REQUIRED BY ISC OR ITS AFFILIATES. (VI) THE PARTIES AGREE THAT THESE RIGHTS OF FIRST REFUSAL FOR BOTH PARTIES AS MENTIONED IN THIS AGREEMENT ARE INTENDED TO ENHANCE OPPORTUNITIES FOR MUTUAL BENEFIT BY ENABLING THEM T O WORK TOGETHER AND ARE SUBJECT TO EACH PARTY MEETING THE REQUIREME NTS OF FUNCTIONALITY, ADHERENCE TO SERVICE LEVEL AGREEMENT S, PREFERENTIAL PRICING REFLECTING COMPETITIVE MARKET CONDITIONS, A ND CUSTOMER REQUIREMENTS WHICH MAY APPLY IN EACH INSTANCE. REFERRING TO THESE CLAUSES, COUNSEL SUBMITS THAT AS SESSEE IS NOT PREVENTED FROM DOING ALL THE ABOVE BUSINESS ACT IVITIES. THEREFORE, HE SUBMITS THAT ENTIRE UNDERTAKING IS NO T SOLD AS STOCK-LOCK BARREL AND THERE IS NO SLUMP SALE. HE VE HEMENTLY SUPPORTS THE ORDER OF THE COMMISSIONER OF INCOME TA X (APPEALS) IN ALLOWING THE CLAIM OF THE ASSESSEE. 6. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES. THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSME NT DID NOT ALLOW BUSINESS LOSS AGAINST INTEREST INCOME STA TING THAT ASSESSEE DID NOT CARRY ON ANY BUSINESS DURING THIS ASSESSMENT YEAR UNDER CONSIDERATION AND THE ASSESSE E SOLD ITS BUSINESS IN THE YEAR 2004-05 TO M/S. EFUNDS INT ERNATIONAL 9 ITA NO.1987/MDS/2014 P.LTD. THE ASSESSING OFFICER ALSO IGNORED INCOME OF ` 7,00,000/- SHOWN BY THE ASSESSEE FOR THE JOB WORK D ONE BY THE ASSESSEE FOR M/S. CASH LINK GLOBAL SYSTEMS (P)L TD. DURING THE ASSESSMENT YEAR UNDER CONSIDERATION. TH E ASSESSING OFFICER WAS OF THE OPINION THAT THE ENTIR E BUSINESSES WERE SOLD IN THE YEAR 2005 BY THE ASSESS EE AND FURTHER BARRED FROM ENTERING INTO SAME LINE OF BUSI NESS FOR THREE YEARS. ON APPEAL, THE COMMISSIONER OF INCOME TAX (APPEALS) ALLOWED THE CLAIM OF THE ASSESSEE HOLDING THAT EVEN THOUGH ENTERED INTO BUSINESS TRANSFER AGREEMEN T, THE ASSESSEE CONDUCTED JOB WORK IN THE SUBSEQUENT TWO F INANCIAL YEARS I.E. 2005-06 AND 2006-07 TO THE VERY SAME M/ S. EFUNDS INTERNATIONAL P.LTD. BY RETAINING PORTION OF FIXED ASSETS AND EMPLOYEES. THEREFORE, COMMISSIONER OF IN COME TAX (APPEALS) ELABORATELY CONSIDERED THE SUBMISSION S OF THE ASSESSEE AND THE CONTENTIONS OF THE ASSESSING OFFIC ER AND CONCLUDED THAT THE ASSESSEE CARRIED ON THE BUSINESS DURING THE ASSESSMENT YEAR UNDER CONSIDERATION AND THEREFO RE LOSS HAS TO BE ALLOWED OBSERVING AS UNDER:- I HAVE CONSIDERED THE ASSESSEE'S SUBMISSIONS AS WE LL AS THE ASSESSMENT ORDER CAREFULLY. THE ASSESSING OFFIC ER'S OBSERVATIONS THAT CONSEQUENT TO THE TRANSFER OF ITS 'OUTSOURCING OF ATMS BUSINESS' TO M/S. EFUNDS 10 ITA NO.1987/MDS/2014 INTERNATIONAL P LTD IN F.Y.2005, THE ASSESSEE HAS N OT CARRIED OUT ANY BUSINESS, IS FACTUALLY NOT CORRECT. NO DOUBT THE ASSESSEE IS PROHIBITED FOR ENTERING INTO THE SA ME LINE OF BUSINESS FOR A PERIOD OF 3 YEARS. BUT THE ASSESSEE IS FREE TO TAKE UP ANY OTHER BUSINESS. IN FACT, THE ASSESSEE C OMPANY HAS GOT THE SUB-CONTRACT WORK FROM M/S. EFUNDS INTERNATIONAL P LTD ITSELF IN THE FOLLOWING TWO YEA RS I.E. IN F.Y. 2005-06 AND 2006-07. THIS CLEARLY SHOWS THAT T HE ASSESSEE WAS CARRYING ON THE BUSINESS ACTIVITIES EV EN AFTER THE TRANSFER OF ITS 'OUTSOURCING OF ATMS BUSINESS' TO M/S. EFUNDS INTERNATIONAL P LTD, IN THE FORM OF SUB-CONT RACTS FROM M/S. EFUNDS INTERNATIONAL P LTD. FURTHER AS COULD BE SEEN FROM THE ASSESSEE'S P&L ACCOUNTS AND THE BA LANCE SHEETS OF THE F.YS. 2005-06, 2006-07 AND 2007-08, T HE ASSESSEE HAS NOT TRANSFERRED THE ENTIRE INCOME EARN ING APPARATUS AS SUCH. WHILE TRANSFERRING THE 'OUTSOURC ING OF ATMS BUSINESS' TO M/S. EFUNDS INTERNATIONAL P LTD, ONLY THE BUSINESS ACTIVITY ALONG WITH CONTRACTS, CUSTOME RS, BUSINESS DEBTORS, SOME EMPLOYEES, SOME FIXED ASSETS WERE TRANSFERRED. IN OTHER WORDS, THE ASSESSEE STILL LEF T 'WITH SEVERAL EMPLOYEES AND SOME OF THE BUSINESS INFRASTR UCTURE, WHICH ARE ENOUGH TO CARRY ON BUSINESS, THOUGH ON A LESSER SCALE. THE INCOMES GENERATED FROM 'OUTSOURCING OF A TMS BUSINESS' IN FY 2004-05, ITS SUB-CONTRACTS (JOB WOR K) INCOME IN FYS 2005-06 & 2006-07, OTHER BUSINESS INCOMES, INTEREST INCOME ETC, THE EMPLOYEE COST, ADMINISTRATION COSTS, DEPRECIATION ETC, OF THE FYS. 2004-05, 2005-06, 2006-07 AND 2007-08 ARE AS UNDER:- PARTICULARS F.Y.2004-05 F.Y.2005-06 F.Y.2006-07 F.Y.2007-08 INCOME INCOME FROM OPERATIONS 27,38,53,217* 5,84,55,191 ** 6,97,22,850** 7,00,000 OTHER REVENUES - - 30,931 - DIVIDENDS - - 2,27,371 - INTEREST RECEIVED 1,84,124 1,58,20, 240 1,50,51,701 2,56,64,169 PROFIT(LOSS)- SALE OF ASSETS (3,92,661) 48,824 (12) (740) TOTAL 27,39,31,695 7,67,72, 905 8,50,32,841 2,63,63,429 EXPENSES EMPLOYEE COST 1,40,74,318 59,2~,15 3 21,31,874 38,63,639 OPERATION EXPENSES 14,79,61,108 6,11,39, 654 4,90,23,967 2,45,80,807 ADMINISTRATIVE EXPENSES 3,41,24,253 5,26,02. 444 DEPRECIATION 1,92,06,509 49,95,27 5 14,92,079 16,95,222 PRELIMINARY EXPENSES 1,22,088 1,22,062 - - DEFERRED REV. EXPENSES 1,15,11,382 21,58,25 0 - - TOTAL 22,69,99,658 12,69,39 ,858 5,26,47,940 3,01,39,668 NET PROFIT (LOSS) 4,69,32,037 (5,01,66,953) 3,23,84,901 (37,76,239) .. NOTE : *FROM THE ORIGINAL BUSINESS OF OUTSOURCING OF ATMS BUSINESS 11 ITA NO.1987/MDS/2014 ** FROM THE JOB-WORK OF OUTSOURCING OF ATMS BUSINE SS PERUSAL OF THE ABOVE DATA CLEARLY SHOWS THAT EVEN A FTER THE TRANSFER OF 'OUTSOURCING OF ATMS BUSINESS' TO M/S. EFUNDS INTERNATIONAL P LTD IN 2005, THE ASSESSEE RETAINED A PORTION OF THE EMPLOYEES' AND INFRASTRUCTURE (FIXED ASSETS LIKE CO MPUTERS, ELECTRICAL EQUIPMENT, FURNITURE ETC). THESE EMPLOYE ES AND THE INFRASTRUCTURE ARE CAPABLE OF RUNNING THE BUSINESS EITHER IN THE SAME LINE OR ANY OTHER BUSINESS. IN FACT, THESE EMP LOYEES AND THE INFRASTRUCTURE WERE UTILIZED BY THE ASSESSEE TO RUN THE SUB-CONTRACT BUSINESS OF 'OUTSOURCING OF ATMS BUSINESS' AWARDED BY M/S. EFUNDS INTERNATIONAL P LTD, IN NEXT FOLLOWING 2 YEA RS I.E. FYS 2005- 06 & 2006-07. THIS CLEARLY SHOWS THAT THE ASSESSEE WAS CARRYING ON THE BUSINESS IN THE FY S 2005-06 & 2006-07, BY WAY OF JOB-WORK TO M/S. EFUNDS INTERNATIONAL P LTD, THAT TOO IN THE SAME LI NE OF BUSINESS OF 'OUTSOURCING OF ATMS BUSINESS'. THE INC OMES GENERATED BY THE SAID JOB-WORKS DURING THESE FINANCIAL YEARS ARE RS.5,84,55,191/- AND RS.6,97,22,8501-, RESPECTIVELY, WHICH IS ABOUT 1/4TH TO 1/5 TH OF THE REGULAR BUSINESS PREVAILING IN F.Y.2004-05. THUS THE ASSESSEE COMPANY WAS CARRYING ON THE BUSIN ESS DURING THE FINANCIAL YEARS AND ALSO OFFERED THE SAME UNDER THE HEAD 'INCOME FROM BUSINESS'. THESE ARE THE UNDISPUTED FACTS. AS MENTIONED ABOVE, AFTER THE TRANSFER OF OUTSOURC ING OF ATMS BUSINESS TO M/S. EFUNDS INTERNATIONAL P LTD, THE ASSESSEE RETAINED PORTION OF EMPLOYEES AND INFRASTRUCTURE. T HESE FACTS ARE CLEARLY AVAILABLE FROM ABOVE DETAILS OF P&L ACCOUNT S OF THE ASSESSEE. THE EMPLOYEE COST IN F.Y.2004-05 (I.E. BE FORE THE TRANSFER OF 'OUTSOURCING OF ATMS BUSINESS' TO M/S. EFUNDS IN TERNATIONAL P LTD) WAS RS.140.74 LAKHS. IN THE FOLLOWING YEAR (I. E. AFTER THE TRANSFER OF 'OUTSOURCING OF ATMS BUSINESS') EMPLOYE E COST WAS RS.59.22 LAKHS, WHICH IS ABOUT 42% OF THE PREVIOUS YEAR'S EMPLOYEE COST. IN OTHER WORDS, THE ASSESSEE RETAINE D MORE THAN 40% OF THE EMPLOYEES/MANPOWER EVEN AFTER THE TRANSF ER OF THE BUSINESS. WITH THESE EMPLOYEES/ MANPOWER, THE ASSES SEE COMPANY CARRIED OUT THE JOB-WORK TO THE TRANSFEREE COMPANY M/S. EFUNDS INTERNATIONAL P LTD IN THE FOLLOWING TWO FIN ANCIAL YEARS. THOUGH THE EMPLOYEE/ MANPOWER COST OF THE F. Y.2006-07 WAS REDUCED TO RS.2L.31LAKHS, IT AGAIN INCREASED TO RS.38.63 LAKHS IN F.Y.2007-08. THESE FACTS CLEARLY SHOW THAT THE A SSESSEE'S EMPLOYEE / MANPOWER AND INFRASTRUCTURE REMAINED INTACT DURING THE F.YS. 2005-06, 2006-07 AND 2007-08. EVEN THE PERUSALS OF THE DEPRECIATION SCHEDULES OF THESE FINANCIAL YEARS CLEARLY SHOWS THAT THE ASSESSEE, EV EN AFTER THE TRANSFER OF 'OUTSOURCING OF ATMS BUSINESS' TO M/ S. EFUNDS INTERNATIONAL P LTD, RETAILED CERTAIN INFRASTRUCTUR E LIKE COMPUTERS, ELECTRICAL EQUIPMENT, PREMISES, FURNITURE ETC WITH WHICH IT WAS CARRYING ON THE JOB- WORK BUSINESS TO M / S. EFUNDS INTERNATIONAL P LTD, DURING THE FINANCIAL YEARS 2005-06 AND 2006- 07, IN THE FIELD OF 'OUTSOURCING OF ATMS BUSINESS'. THESE INFRASTRUC TURAL FACILITIES ARE REMAINING INTACT IN THE FINANCIAL YE AR 2007-08 AS 12 ITA NO.1987/MDS/2014 WELL. THESE FACTS ARE CLEARLY AVAILABLE FROM THE DE PRECIATION SCHEDULES OF THE BALANCE SHEETS ENCLOSED ALONG WITH THE RETURNS OF INCOME. FROM THE ABOVE DETAILS IT IS CLEAR THAT THE ASSESS EE'S EMPLOYEE/MANPOWER AND THE INFRASTRUCTURAL FACILITIE S ARE REMAINING INTACT IN THE FINANCIAL YEAR 2007-08 AND THE ASSESSEE HAS BEEN EXPLORING TO UNDERTAKE NEW ACTIVI TIES. IN FACT, DURING THE FINANCIAL YEAR 2007-08, THE ASSESSEE, BY UTILIZING THE SAID EMPLOYEE/MANPOWER AND THE INFRASTRUCTURAL FACI LITIES, ALSO CARRIED OUT A NEW CONTRACT WORK FOR M/S CASH LINK G LOBAL SYSTEMS (P) LTD AND EARNED A BUSINESS INCOME OF RS.7,00,000 /- AND THE SAME WAS ALSO INCLUDED IN THE P&L ACCOUNT AND OFFER ED TO TAX IN THE PRESENT A.Y.2008-09. THE ASSESSING OFFICER ACKN OWLEDGED THE SAID CONTACT RECEIPTS BY ALLOWING THE CREDIT FOR TD S, BUT SURPRISINGLY IGNORED THE SAID INCOME WHILE COMPUTIN G THE INCOME UNDER THE HEAD 'INCOME FROM BUSINESS'. FURTHER, AS HELD BY SEVERAL COURTS, EARNING OF INCOME IS NOT THE CRITERIA TO PR OVE THAT THE BUSINESS IS IN EXISTENCE. WHAT IS REQUIRED TO BE SE EN IS THE EXISTENCE OF INCOME EARNING APPARATUS (LIKE EMPLOYE ES/MANPOWER, PLANT AND MACHINERY ETC) AND THE EFFORTS MADE BY TH E ASSESSEE INTO CARRY OUT THE BUSINESS. IN THE PRESENT CASE, ALL TH ESE CRITERIA ARE CLEARLY EXISTING IN FAVOUR OF THE ASSESSEE. IN VIEW OF THE ABOVE REASONS AND SINCE THE ASSESSEE 'S EMPLOYEE/MANPOWER AND THE INFRASTRUCTURAL FACILITIE S ARE REMAINING INTACT IN THE FINANCIAL YEAR 2007-0.8 AND ALSO CARRIED OUT A NEW CONTRACT WORK FOR M/S CASH LINK GLOBAL SY STEMS (P) LTD AND EARNED A BUSINESS INCOME OF RS.7,00,000/- DURIN G THE YEAR, THE ASSESSING OFFICER IS NOT JUSTIFIED IN COMING TO THE CONCLUSION THAT THE ASSESSEE DID NOT CARRY OUT ANY BUSINESS ACTIVIT IES DURING THE YEAR. ON THE OTHER HAND, THE ABOVE FACTS CLEARLY PR OVES THAT THE ASSESSEE'S BUSINESS ACTIVITIES ARE IN EXISTENCE AND ALSO EARNED A BUSINESS INCOME OF RS.7,00,000/- DURING FINANCIAL Y EAR RELEVANT TO THE A.Y.2008-09, HENCE THE ASSESSEE HAS THE RIGHT T O CLAIM ALL THE EXPENSES UNDER THE HEAD 'INCOME FROM BUSINESS' AND THE RESULTING LOSSES, IF ANY, ARE ALSO ELIGIBLE FOR SET. OFF AGAI NST THE INCOME FROM OTHER HEADS AS PER THE LAW. THE ASSESSING OFFICER I S DIRECTED TO ALLOW THE ASSESSEE'S CLAIM OF LOSSES UNDER THE HEAD 'INCOME FROM BUSINESS' AND THEIR SET OFF AGAINST THE INCOME OF O THER HEADS . 7. ON GOING THROUGH THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), IT IS VERY CLEAR THAT THE ASS ESSEE HAS NOT TRANSFERRED THE ENTIRE UNDERTAKINGS BUT ONLY PO RTION OF IT WAS TRANSFERRED BY WAY OF BUSINESS TRANSFER AGREEME NT AND THE ASSESSEE HAS CARRIED ON THE BUSINESS OF JOB WOR K OF 13 ITA NO.1987/MDS/2014 OUTSOURCING OF ATMS BUSINESS IN THE FINANCIAL YEARS 2005-06 AND 2006-07 AND EARNED INCOME OF ` 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 FIND ING OF THE COMMISSIONER OF INCOME TAX (APPEALS) THAT THE ASSES SEE HAS RETAINED PORTION OF EMPLOYEES AND INFRASTRUCTUR E I.E. FIXED ASSETS LIKE COMPUTERS, ELECTRICAL EQUIPMENTS, FURNI TURE ETC. THESE EMPLOYEES AND INFRASTRUCTURES ARE CAPABLE OF RUNNING THE BUSINESS EITHER IN THE SAME LINE OR IN ANY OTHE R BUSINESS. IT IS THE FINDING OF THE COMMISSIONER OF INCOME TAX (APPEALS) THAT DURING THE FINANCIAL YEAR 2007-08 RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE U TILIZING THE SAID EMPLOYEES, MANPOWER AND INFRASTRUCTURAL FA CILITIES CARRIED OUT A NEW CONTRACT WORK FOR M/S. CASH LIN K GLOBAL SYSTEMS (P)LTD. AND EARNED BUSINESS INCOME OF ` 7,00,000/-, THEREFORE HE CONCLUDED THAT ASSESSEE I N FACT CARRIED ON THE BUSINESS EVEN AFTER THE BUSINESS TRA NSFER AGREEMENT IN THE YEAR 2005. ON GOING THROUGH THE AB OVE 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- 14 ITA NO.1987/MDS/2014 09 AND THEREFORE LOSS IS TO BE ALLOWED. THUS, WE SU STAIN THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) A ND REJECT THE GROUNDS RAISED BY THE REVENUE. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH OCTOBER, 2015. SD/- SD/- ( . ) ( ( *+ ) ( A.MOHAN ALANKAMONY ) ( CHALLA NAGEND RA PRASAD ) - / ACCOUNTANT MEMBER * - / JUDICIAL MEMBER * /CHENNAI, / /DATED 28 TH OCTOBER, 2015 SOMU 12 32 /COPY TO: 1. APPELLANT 2. RESPONDENT 3. 4 () /CIT(A) 4. 4 /CIT 5. 2 7 /DR 6. /GF .