Legal expenses for investment evaluation deemed revenue expenditure, interest on mortgaged property loans allowed as business deduction

ITAT Delhi allowed the assessee's appeal on two grounds. First, legal and professional expenses incurred for evaluating potential investment in shares were held to be revenue expenditure, not capital expenditure, as these were preliminary steps for decision-making rather than for acquiring capital assets. Second, interest expenses on loans against mortgaged property were allowed as deductible business expenses since the funds were used for trading securities, which was within the company's business objects, and the company had substantial income from both rental (Rs. 3.09 crores) and securities trading (Rs. 100.36 crores).

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Issues involved: Appeal against order of Commissioner of Income-Tax (Appeals) regarding disallowance of professional fee and interest expenses u/s 143(3) of Income-Tax Act, 1961.

Professional Fee Disallowance:
The Assessee appealed against disallowance of professional fee for market research and acquisition expenses. The expenditure was incurred to decide on investment in a company, not for acquiring capital assets. Legal precedents were cited to support revenue expenditure treatment. The Tribunal allowed this ground based on the purpose of the expenditure and legal principles.

Interest Expenses Disallowance:
The Assessee challenged the disallowance of interest expenses on a loan against property used for investment in shares. Lack of evidence was cited as the reason for disallowance. However, the Assessee provided bank statements and other documents showing the loan was used for share investments. The Tribunal found the loan was used for business purposes related to trading in securities, making it an allowable expense. The appeal was allowed, and the additions were deleted.

*Separate Judgment by Judges:*
The judgment was delivered by Shri Anubhav Sharma, Judicial Member.

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