TaxTMI 
TaxTMI 
2014 (9) TMI 832
X X X X Extracts X X X X
X X X X Extracts X X X X
....r on the facts and circumstances of the case and in law, the ITAT was justified in deleting the disallowance of expenditure of Rs. 6,60,52,000/- claimed by the assessee, without appreciating that the impugned expenditure was necessitated due to the coming into existence of the new entity ie., the resulting assessee company consequent upon demerger and therefore, the A.O had rightly treated it as capital expenditure." 2. Brief facts necessary for adjudication are as follows : 2.1 The assessee company is engaged in the business of generation, transmission and distribution of electricity in the State of Gujarat. The erstwhile Gujarat Electricity Board in a process of restructuring was demerged into seven different companies. Gujarat Urja....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eals]. CIT [A] extensively dealt with the issue and held in favour of the assessee holding that Messrs. Crisil Limited and Feedback Ventures Limited were paid certain amounts for preparation, finalization and for filing of the annual revenue requirement [ARR], petitions before GERC, for preparation of shortterm power purchase agreements and for formulating strategies for demand side management. Moreover, other expenses were neither covered nor could be categorized as capital in nature. 5. CIT [A] when allowed the appeal of the assesseerespondent and held that the payments made were not capital in nature, the Department chose to challenge such order by preferring appeal before the Tribunal. 6. The Tribunal concurred with the findings o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e paid professional and consultancy fees for advice on statutory and regulatory issues and for representing the respondentassessee in various matters before the Courts of law. Moreover, for representing the respondentcompany, professional fees were paid to the senior advocates of the Gujarat High Court in the matter relating to Letters Patent Appeal and Special Civil suits. For restructuring the high cost debts, Messrs. Allianz Securities Limited were paid professional fees. For proper maintenance of EPBX system and WAN network systems, Messrs. Siemens Limited were paid annual maintenance contract charges. It was the case of the respondent that none of these investments could be said to be capital in nature for not having any enduring benef....
X X X X Extracts X X X X
X X X X Extracts X X X X
....wise, Item Nos. 7 & 8 are also "advocate fees" paid to counsel to represent the respondentassessee before the Gujarat High Court in Letters Patent Appeal as well as Special Civil Suits. Wherever, there was a legal consultancy or fees paid to the advocates, there is hardly any dispute that such fees cannot be said to have been capital in nature. The only emphasis is on the sum of Rs. 1.10 Crores which has been spent towards IT system by Gujarat Info Petro Limited. As could be noticed, this was for the purpose of supporting LAN networking for providing IT professional facility management service and also for coordination with BSNL for internet connectivity and providing IT providing and upgrading internet bandwith. It can be noted that such c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....payment has been made to the financial consultants. This was for the purpose of business and the same was held to be allowable under section 37 (1) of the Act. Having held the said amount to be revenue in nature applying the decision of the Supreme Court in the case of Madras Industrial Investment Corporation Limited (Supra), when the amount has been spread over a period of six years, no error is committed by both the authorities. Once the expenditure is held to be revenue in nature incurred wholly and exclusively for the purpose of business, it can be allowed in its entirety in the year in which it is incurred. However, considering the decision in the case of Madras Industrial Investment Corporation Limited (Supra), when the spreading is d....