consisted of a PR brand which was managed by the assessee company on behalf of its holding company, Bennett Coleman & Co. Ltd. till 30.09.2004. The holding company withdrew this right from the assessee company from 30.09.2004 and handed over this business to a new group company called Optimal Media Solutions Ltd. After the termination of this line of business in the immediately preceding year, the assessee claimed not to have been engaged in rendering any services relating to Medianet business. The assessee also furnished particulars of income earned by the new company, M/s Optimal Media Solutions Ltd., from the business. Similarly, regarding the Sale of contents, the assessee submitted that this business hitherto entrusted to the assessee by its holding company was withdrawn w.e.f. 1.10.2004. Necessary communications withdrawing the above businesses from the assessee were also furnished to the AO. In this backdrop of the facts, the AO noticed that albeit such businesses were not carried on by the assessee during the year, the overall expenses of the assessee were still on northwards sojourn. This was held on the strength of the percentage of the expenses to revenue at 62.8% for the assessment year 2004-05 when the assessee was having these businesses; during the assessment year 2005-06 when these businesses remained with the assessee for a part of the year, the percentage of expenses went up to 73.5%; and during the year under consideration when these businesses were not at all carried on by the assessee, the percentage of expenses increased to 107.8%. The AO inferred that though: “there is no income on account of these two businesses to the assessee, but, still, it is incurring expenses for these two businesses.” Applying the percentage of expense at 62.8% as relevant for the A.Y. 2004-05, the AO made disallowance for the remaining expenses of Rs.16,12,31,000/-. This disallowance was deleted in the first appeal. The Revenue is aggrieved against such deletion.
