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TMI Blog2016 (1) TMI 634X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 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 - Decided in favour of assessee. - I .T.A.No.1987/Mds/2014 - - - Dated:- 28-10-2015 - SHRI A.MOHAN ALANKAMONY ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER For The Appellant : Mr. A.V.Sreekanth, JCIT For The Respondent : Mr. T.Banusekar, C.A. ORDER Per Challa Nagendra Prasad, JM: This appeal is filed by the Revenue against the order of the Commissioner of Income Tax (Appeals)-II, Chennai d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the business of providing automated teller machine (ATMs) infrastructural facilities under outsourcing, filed its return of 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 assessee 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 business in the financial year 2004-05 to eFunds International P.Ltd. through business transfer agreement and by virtue of this agreement, 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 business activity during the year, the expenses claimed by the assessee were not prima-facie incidental to business, therefore, interest expenses cannot be allowed to set off against business losses. The assessee preferred appeal before the Commissioner of Income Tax (Appeals) conten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Officer has rightly assessed the interest under the head income from 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 31st March, 2005 by the assessee company and M/s. eFunds International P.Ltd. for transfer of Sun-Oasis platform business. Counsel for the assessee further submits that the tandem-base 24 platform related business was not sold by the assessee. Counsel submits that the assessee retained portion of employees and infrastructure, fixed assets like computer, furniture etc. and carried on business of tandem-base 24 platform related business. The counsel for the assessee further submits that in fact assessee carried on job work of outsourcing of ATM business for the very same M/s. eFunds International P.Ltd. during the financial years 2005-06 2006-07 and earned revenue of about ` 12.81 crores, even though the assessee entered into business transfer agreement in the financial year 2004-05 itself. He submits that this clearly shows that assessee has not sold its entire undertaking so as to treat i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate is an authorized distribution channel for those devices at the time of the transaction. (v) Reciprocally, 1SC and its Affiliates shall, during the Restricted Period, provide the Purchaser with a right of first refusal for third party processing and networking solutions 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 production 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 to work together and are subject to each party meeting the requirements of functionality, adherence to Service Level Agreements, preferential pricing reflecting competitive market conditions, and customer requirements which may apply in each instance. Referring to these clauses, counsel submits that assessee is not prevented from doing all the above business activities. Therefore, he submits that entire undertaking is not sold as stock-lock barrel and there is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom M/s. eFunds International P Ltd. Further as could be seen from the assessee's P L accounts and the balance sheets of the F.Ys. 2005-06, 2006-07 and 2007-08, the assessee has not transferred the entire income earning apparatus as such. While transferring the outsourcing of ATMs business to M/s. eFunds International P Ltd, only the business activity along with contracts, customers, business debtors, some employees, some fixed assets were transferred. In other words, the assessee still left 'with several employees and some of the business infrastructure, which are enough to carry on business, though on a lesser scale. The incomes generated from 'outsourcing of ATMs business' in FY 2004-05, its sub-contracts (job work) 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:- Perusal of the above data clearly shows that even after 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 comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to M/ s. eFunds International P Ltd, retailed certain infrastructure 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 infrastructural facilities are remaining intact in the financial year 2007-08 as well. These facts are clearly available from the depreciation schedules of the balance sheets enclosed along with the returns of income. From the above details it is clear that the assessee's employee/manpower and the infrastructural facilities are remaining intact in the financial year 2007-08 and the assessee has been exploring to undertake new activities. In fact, during the financial year 2007-08, the assessee, by utilizing the said employee/manpower and the infrastructural facilities, also carried out a new contract work for M/s Cash Link Global Systems (P) Ltd and earned a business income of ₹ 7,00,000/- and the same was also included in the P L account and offered to tax in the present A.Y.2008-09. The Assessing Officer acknowledged the said contact receipts by all ..... X X X X Extracts X X X X X X X X Extracts X X X X
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