PATMAN & G. HOSPITALITY P.LTD,MUMBAI vs. ITO 7(1)(3), MUMBAI

आदेश / O R D E R PER R.C.SHARMA (A.M): This is an appeal filed by the assessee against the order of CIT(A) for the assessment year 2008-09, in the matter of order passed u/s.143(3) of the IT Act. 2. In this appeal, assessee is aggrieved for disallowance of business expenditure and for making addition on account of interest which was not received by the assessee during the year under consideration. 3. Rival contentions have been heard and record perused. 4. Facts in brief are that the assessee company was engaged in the business of indoor catering and housekeeping. During the previous year relevant to assessment year under consideration, the assessee company M/s. Patman & G. Hospitality Pvt. Ltd., had sold its business together with its fixed assets to Aramark Patman services private limited vide asset purchase agreement dated 01.10.2007 and declared profit on slump sale u/s 50B of the Act. The assessee also entered into an agreement of non-compete fee for five years from the closing date. The AO noticed that the assessee in the P&L account had shown the following income and expenses:-

M/s. Patman & G. Hospitality Pvt. Ltd., 8. We have considered rival contentions and found from record that during the Assessment Year 2008-09 the assessee company sold a part of its business undertaking to Aramark India Private Limited. As part of the conditions of sale, the assessee company was to receive the income on behalf of Aramark India Private Limited and transfer the same to them. The business of the company did not cease to operate on sale of one of its business activities and hence expenses incurred during the year were incidental to the business of the company. We found that during the year the trade debts remained undischarged and the activity of collection from debtors approximately Rs 55.88 lakhs was continued throughout the year with continuous follow up and collection. Payments were made to creditors approximately Rs 50 lakhs throughout the year. Further as part of the contract with Aramark the assessee was required to collect the funds on contracts originally entered into by parties with the assessee and transfer the same to Aramark. The assessee has carried out activities pertaining to collection and reconciliation of party accounts and also transferred the same to Aramark. Company has expenses pertaining to Purchase Costs of Rs 91116. Communication and electricity costs, which have been incurred for carrying on the business of Rs 182373. The company has paid charges for ROC expenses and for obtaining a digital signature The company has paid legal and professional fees to the extent of Rs 175923 for consultation on property matters and other company affairs The company has taken insurance for its assets and paid a fee of Rs 28879.

M/s. Patman & G. Hospitality Pvt. Ltd., 9. As per our considered view, the business of assessee continued during the year and all these expenditure are required to be allowed in so far as expenses were incurred for the purpose of business. In the interest of justice, we restore this issue back to the file of the AO with a direction to verify the genuineness of expenses and supporting bills, vouchers of such expenses. The AO is to allow the same after giving due opportunity to the assessee. We direct accordingly.