TMI Blog2016 (9) TMI 542X X X X Extracts X X X X X X X X Extracts X X X X ..... peals)- II, Chennai dated 16.07.2014 in ITA No.438/13-14 passed under section 143(3) r.w.s. 250(6) of the Act. 2. The Revenue has raised several grounds in its appeal, however the crux of the issue is as follows:- The learned Commissioner of Income Tax (Appeals) has erred in deleting the addition of ₹ 90,00,000/- which was assessed as business receipts under section 28(1)(va) of the Act by the learned Assessing Officer as against Nil short term capital gain claimed by the assessee. 3. Brief facts of the case are that the assessee is an individual, designated Director of M/s. Edserv Soft Systems Ltd., filed his return of income for the assessment year 2008- 09 on 20.03.2009 admitting income of ₹ 17,33,750/-. The case was selected for scrutiny and the assessment was completed under section 143 (3) of the Act on 21.12.2010 by making certain additions/disallowances. On appeal, the learned Commissioner of Income Tax (Appeals) deleted the addition of ₹ 90,00,000/- which was treated as business income under section 28(1)(va) of the Act by the learned Assessing Officer as against the Nil short term capital gains claimed by the assessee. 4. During the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmissions carefully. In the present case, the assessee's claim is that he has purchased business from M/s. Onspec Technology P Ltd along with assets and liabilities for a total consideration of ₹ 9,00,000/- in 2006-07 and sold the same to M/s. Lambent Softsystems P Ltd, in FY 2007-08 for ₹ 90 lakhs, making no profits or gains in the transaction. In relation to this claim the assessee furnished the MOU entered with M/s. Onspec Technolgy P Ltd on 19.03.2007 for purchasing the business along with assets and liabilities for a total consideration of ₹ 9,00,000/-. But the Assessing Officer did not accept the same. The Assessing Officer rejected this MOU basically for two reasons, i.e. (i) that the assessee has not reflected the purchase of this business in his return of income flied for A.Y.2007-08, and (ii) that the assessee has not acted upon the MOU. These two observations of the Assessing Officer are not correct. Since the assessee is an individual with no business income, has not enclosed any balance sheet or statement of affairs (as on 31.03.2007) along with his return of income filed for A.Y.2007-08, as these were not mandatory. Hence there was no occasion f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lacs, by issue of Fully convertible debentures for acquisition of ELMAQ DIVISION. 4.2.5 It is also important to mention here that Shri Girigharan was not doing any business on his own, as could be seen from the assessee's return of income. Therefore, but for acquisition of a business, it would not have been possible for the sale of business including the course contents, brand name of Elmaq, liabilities etc. In other words, if the sale of the business is to be accepted, its corresponding purchase is also to be accepted. Thus, unless there is purchase of the business by the assessee from M / s. Onspec Technolgy P Ltd, it wouldn't have been possible for the assessee to sell the same to M/s. Edserv Softsystems Ltd in the financial year 2007-08. 4.2.6 The other observation of the Assessing Officer is that the transfer of business to M/s. Edserv Softsystems Ltd for ₹ 90 lakhs is nothing but a non-compete fee received. No doubt there is a 'non-compete' clause in the business purchase agreement with M/s. Edserv Softsystems Ltd. But this doesn't mean that the amount was paid for non-competition' only. Whenever, a business is transferred &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2008 for ₹ 90 lakhs. The assessee has only tried to explain these three transactions independently at different stages before the Assessing Officer. However the Assessing Officer took the same as contradicting explanations and change of stands. If the assessee's explanations offered at various stages are analysed these facts can be clearly seen. Therefore no adverse inference can be drawn from the above observation of the Assessing Officer. 4.2.9 The last observation of the Assessing Officer is that the assessee failed produce Shri Ghose, one of the directors of M/s.Onspec Technolgy P Ltd for cross examination. As explained by the assessee, Shri Ghose left the country and residing in USA. Hence he could not appear before the Assessing Officer. 4.2.10 In view of the above reasons, the MOU entered between the assessee and M/s. Onspec Technolgy P Ltd on 13.03.2007, was actually honoured by the assessee and thus the assessee's purchase of business from M/s. Onspec Technolgy P Ltd for ₹ 90 lakhs in 2006- 07 is to be considered as genuine. Subsequently, the said business was sold to M/s. Edserv Softsystems Lmited for ₹ 90 lakhs on 29.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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