Corporate governance consultancy and buyback advisory costs were held deductible as business revenue expenditure.

Consultancy paid for corporate governance and compliance services was deductible as business expenditure because the Tribunal's finding was supported by invoices, board resolution, tax deduction at source, and evidence of actual services rendered; the payment was therefore allowable. Expenditure on advisory services connected with buyback of shares was revenue in nature under section 37 because the transaction did not bring in fresh funds, increase capital employed, create an asset, or confer an enduring advantage; the expenditure was therefore allowable. The additions were not sustained.

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Issues: (i) whether consultancy paid to a financial expert for corporate governance and compliance services was an allowable business deduction; and (ii) whether expenditure incurred for advisory services in connection with buyback of shares was revenue expenditure allowable under section 37 of the Income-tax Act, 1961.

Issue (i): whether consultancy paid to a financial expert for corporate governance and compliance services was an allowable business deduction.

Analysis: The Tribunal had found, on the basis of invoices, board resolution, tax deducted at source, and the nature of services rendered, that the payment was made for actual consultancy services in relation to review of accounts, audit review, internal controls, and compliance with SEBI corporate governance requirements. The finding was factual and was supported by material on record.

Conclusion: The consultancy payment was allowable and no question of law arose on this issue, in favour of the assessee.

Issue (ii): whether expenditure incurred for advisory services in connection with buyback of shares was revenue expenditure allowable under section 37 of the Income-tax Act, 1961.

Analysis: Expenditure connected with buyback of shares did not result in inflow of fresh funds or increase in capital employed. The transaction reduced the capital base and did not bring into existence any asset or enduring advantage. On the principle distinguishing fresh issue of shares from transactions that do not augment capital employed, the expenditure was treated as having revenue character and as incurred for business purposes.

Conclusion: The buyback-related advisory expenditure was allowable as revenue expenditure under section 37, in favour of the assessee.

Final Conclusion: The appeal failed, as both disputed expenditures were held allowable and the additions were not sustained.

Ratio Decidendi: Expenditure incurred for advisory services relating to share buyback is revenue in nature where it does not create an asset or enduring advantage and does not increase capital employed; actual consultancy services proved on record are deductible as business expenditure.

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