By TIOL News Service

NEW DELHI, AUG 27, 2016: THE issue is - Whether a licencee can claim entitlement to business loss on account of forfieture of the licence fee, where the loss, if any, on account of forfeiture was sustained not by the said licencee but by the tranferee. NO IS THE ANSWER.

Facts of the case:

The Revenue had preferred the present appeal challenging the order, whereby the High Court had upheld that order of ITAT in deleting the addition of the licence fee paid by the assessee, on the ground that since forfeiture of the amount of the licence fee had taken place, the said amount had to be set off as loss for the assessment year in question.

The Supreme Court has held that,

++ if the licence fee stands forfeited, the licencee i.e., the assessee may be entitled to claim the forfeited amount as a business loss. However in the present case, from the grounds urged before the High Court which facts have not been controverted by the assessee, it appears that the assessee had transferred the licence on 25th June 2005 to one Shankarlal Patidar and the forfeiture of the said licence took thereafter on 1st Aug, 2005.

++ if that be so, the loss, if any, on account of forfeiture was sustained not by the assessee but by the tranferee-Shankarlal Patidar. In view of the above and as the Tribunal and the High Court have overlooked the aforesaid vital fact, we are of the view that the orders passed by the ITAT & High Court will require to be reversed.

(See 2016-TIOL-140-SC-IT)