Deduction of Professional Fees Allowed as Revenue Expenditure

The High Court allowed the deduction of Rs.11,00,000/- incurred on fees to Gherzi Eastern Ltd. as revenue expenditure for Assessment Year 1991-92, holding it admissible under section 37 of the Income Tax Act, 1961. The court ruled in favor of the appellant/assessee, overturning the Income Tax Appellate Tribunal's decision to disallow the payment to GEL as a professional/technical fee. The appellant/assessee was granted the right to claim the deduction, with the court providing directions based on a previous judgment and disposing of the appeal accordingly.

---

---

Issues:
The judgment concerns the Assessment Year (AY) 1991-92 and involves the following substantial questions of law:
1. Whether the “renovation and repair” expenses, partly capitalized in the books of account of the Assessee, are revenue expenditure admissible u/s 37 of the Income Tax Act, 1961Rs.
2. Whether the payment made to Gherzi Eastern Ltd., an interior architect, for consultancy and supervision of interior décor under “renovation and refurbishment” is capital expenditureRs.

Summary:
In this case, the High Court addressed the appeal challenging the order passed by the Income Tax Appellate Tribunal for AY 1991-92. The Tribunal had disallowed the payment made by the appellant/assessee to Gherzi Eastern Ltd. (GEL) as a professional/technical fee. The Commissioner of Income Tax (Appeals) and the Tribunal upheld this decision. However, based on a previous judgment concerning AY 1992-93, the High Court allowed the deduction of Rs.11,00,000/- incurred on fees to GEL as revenue expenditure. The court held that this amount was admissible u/s 37 of the Income Tax Act, 1961.

The court noted that the substantial questions of law framed were answered in favor of the appellant/assessee and against the revenue. Therefore, the appellant/assessee was entitled to claim the deduction for the fees paid to GEL. The judgment provided directions based on the previous decision and disposed of the appeal accordingly.

---