Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2014 (11) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2014 (11) TMI 1051 - AT - Income TaxExpenditure incurred wholly and exclusively in connection with transfer as contemplated u/s. 48(i) - Whether the payment is actually made as per the agreement? - Payments to the employees - Voluntary payment - Held that:- The assessee established substitution of the conditions mentioned in clause 29 of the share purchase agreement with the manner in which assessee discharged payments to the employees, then the additional evidence with regard to payments could have been examined. Since the assessee has failed to do so, claim of the assessee for having made payments to employees can at best be regarded as a voluntary payment, which cannot be said to be expenditure incurred wholly and exclusively in connection with the transfer of shares. We may also add that the question whether the expenditure is incurred wholly and exclusively in connection with transfer, which is essentially a question of fact, dependent on facts of each case. The judicial precedents cited by the ld. DR before us, can only serve as a guidance. For example in CIT v. Radio Talkies, (1999 (3) TMI 67 - BOMBAY High Court ), there was a sale of business of exhibiting films and property consisting of land and buildings. The agreement provided that seller had to discharge the liabilities of employees’ gratuity, retrenchment compensation, bonus, etc. Payment was to the former employees and not to the employees who continue after take over of the business by the purchaser. In those circumstances, the Hon’ble Bombay High Court held that expenditure was not allowable u/s. 48(i) of the Act. In the present case, however, we are concerned with a case of change of ownership of business, consequent to sale of shares. The entity, Trident, continues to remain in existence. Therefore, the aforesaid decision cannot be applied to the facts of the present case. We have therefore not discussed the case laws cited by the learned DR before us. CIT(A) correctly relied on the decision of the Hon’ble High Court of Karnataka in CIT v. R. Ranga Shetty, [1984 (12) TMI 45 - KARNATAKA High Court], wherein it was held that compensation paid to a tenant on transfer by compulsory acquisition of property is not expenditure incurred in connection with transfer and not allowable as a deduction. Following the said decision, he held that expenditure in question claimed by the assessee was a voluntary payment and therefore cannot be allowed as deduction u/s. 48(i) of the Act. - Decided against assessee
|