ALACRITY HOUSING LTD Vs. CIT

JUDGEMENT

(1.) The tax case appeal is filed by the assessee against the order of the Income-tax Appellate Tribunal, Chennai "A" Bench in I.T.A. No. 2272 of 1997 dated 31-8-2004, relating to the assessment year 1993-94 raising the following substantial questions of law :

(2.) The assessing authority, however, viewed that the claim of the assessee could not be treated as business expenditure, since the assessee had acquired all the assets and liabilities, as mentioned in schedules I and II and that the assessee had undertaken to clear all the liabilities. Hence, being purchase of the business from the transferor company, the question of treating the expenditure incurred thereon by the assessee-company as business expenditure did not arise. Referring to the liabilities of the transferor company which the assessee had undertaken to discharge, the assessing officer held that it was clear that what was acquired by the assessee was the business of the transferor company and, hence, the claim of the assessee could not be allowed. Aggrieved by the same, the assessee went on appeal before the Commissioner of Income tax (Appeals), who agreed with the assessee.

(3.) On going through the various clauses of the agreement, the first appellate authority pointed out that the expenditure incurred towards purchase of the unfinished projects really amounted to transfer of stock-in-trade in the business or the transferor company. Hence, the expenditure was in the revenue field. He further pointed out that the consideration paid under the agreement was to the tune of Rs. 3.20 crores and nothing more. Thus, the assessee was entitled to claim the same as business expenditure. Aggrieved by the order of the Commissioner of Income tax (Appeals), the Revenue preferred an appeal before the Income-tax Appellate Tribunal.