The ITAT allowed the appeal, holding that the impugned legal and...

The ITAT allowed the appeal, holding that the impugned legal and professional expenditures were incurred wholly and exclusively for business purposes and are allowable under section 37(1). The tribunal found no creation of capital assets or enduring advantage from payments made for business strategy, restructuring, preparation of information memoranda, transactional legal documentation, dispute defense, and legal compliance. The AO's disallowance was based on unsupported assumptions lacking demonstrable nexus to capital expenditure. The timing of payments and invoices was held immaterial to the nature of expenditure. Expenses incurred to facilitate investor compliance, defend litigation, or ensure subsidiary governance were classified as revenue in nature. Service tax components were rightly allowed. The decision underscores the distinction between capital and revenue expenditure, affirming that facilitative and protective business expenses do not amount to capital outlay.