DCIT Vs Manipal Global Education Services Pvt. Ltd. (ITAT Bangalore)
The ITAT Bangalore upheld the deletion of disallowance of ₹9.02 crore made by the AO, holding that expenses relating to discontinued operations cannot be restricted merely based on valuation figures used for slump sale.
The assessee had sold a business segment (EdTech division) through slump sale and reported a loss of ₹13.03 crore from discontinued operations in its audited financials. The AO, relying on valuation report figures (which reflected loss only up to a certain date), allowed only proportionate loss of ₹4 crore and disallowed the balance.
The Tribunal noted that the assessee had properly disclosed revenue, expenses, and loss from discontinued operations in line with accounting standards, and all expenses were duly supported and vouched. The AO had not brought any material to doubt the genuineness of such expenditure.
It was further held that valuation reports are relevant for determining sale consideration and capital gains, but not for testing allowability of expenditure, which is governed by section 37(1).
Accordingly, the Tribunal confirmed the CIT(A)’s order and directed deletion of the disallowance, dismissing the Revenue’s appeal.
The ruling reinforces that accounting disclosures and audited financials cannot be disregarded without specific defects, and that slump sale mechanics do not override deduction principles under the Act.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
1. Captioned appeal for assessment year 2021 – 21 is filed by The Deputy Commissioner of Income Tax – Central Circle – 1 (2), Bengaluru [ the ld AO] against the appellate order passed by The Commissioner of Income Tax (Appeals) – 15 Bangalore [The ld. CIT – A] dated 24 July 2025 wherein the appeal filed by the assessee against the assessment order passed under section 143 (3) of The Income Tax Act (The Act) dated 30 December 2022 assessing the total loss of the assessee at ₹ 232,161,791/–, was partly allowed.
