By TIOL News Service

NEW DELHI, SEPT 25, 2017: THE issue before the Bench is - Whether merely because one division of the assessee's business is sold out, the expenditure may necessarily come down. NO is the verdict.

Facts of the case

The assessee is a media company dealing in a wide range of services, such as online news, e-commerce, music, radio, television, video, daily deals, sports, educational platforms and location-based services. In its returns for the AYs 2006-07 and 2008-09, the assessee declared that had sold its business. Concurrently, it declared that it incurred expenditures similar to those in previous years. The AO added back Rs. 16,12,31,000/- for the AY 2006-07, and disallowed expenditure of Rs. 28,41,30,727/-. The AO opined that as the business had been sold, the assessee could not have reported such high levels of expenditure. Thus, the AO projected the expenditure incurred for the times it actually carried on business, and applied them for the subsequent periods when the assessee had not carried on such business. Later, the CIT(A) and then the Tribunal set aside such findings of the AO.

On appeal, The High Court held that,

++ considering the Tribunal's findings in the appeal for the AY 2008-09, this court is of the opinion that since the findings of the lower appellate authorities, especially the CIT(A) and the ITAT are concurrent on the facts, it cannot be said that any substantial question of law arises. Even otherwise, the AO's order presumed that the levels of expenditure necessarily had to drop, since the internet based business had been sold by the assessee. Such a conclusion could not have been arrived at unless the AO had considered all other factors including the nature of commercial activities that subsisted without such activity;

(See 2017-TIOL-2007-HC-DEL-IT)