2015 (7) TMI 656

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.... under the field of design and development of telecom products. This appeal relates to the assessment year 2005-2006. The assessee declared the capital gains of Rs. 13,41,19,572/- in the returns of income after claiming deduction of Rs. 2,00,84,088/- which represented legal and professional charges paid to M/s. Marchmont International Finance Limited (hereinafter referred to as 'MIFL'). The assessee was a shareholder in M/s. Deccannet Designs Limited (hereinafter referred to as 'DDL'). He holds 9,01,080 shares out of the total shares of 30,73,299. Thus, he was the major shareholder in the company of which he was a director. There were six other substantial shareholders who between themselves held 19,90,746 shares but none of....

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....rate of 4.93 per share. Under the agreement dated 25.03.2004 he had to pay MIFL the difference of the fee based on the percentage of the purchase consideration and accordingly he paid Rs. 2,00,84,088/- to MIFL as their charges. He claims the same as deduction while computing capital gains on the sale of shares. The Assessing Authority restricted consultancy charges to 25% and disallowed the remaining 75%. The said order was upheld by the Commissioner of Income-Tax (Appeals). 3. In the appeal preferred by the assessee against the said order before the Tribunal it was held that they do not see any reason why the entire legal and professional charges paid to MIFL cannot be allowed when there is no dispute regarding the services rendered by ....

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....s 25% as the professional charges, the Tribunal was not justified in allowing remaining 75% based on the letter written prior to the date of the agreement. Therefore, he submits the impugned order requires interference. 6. Per contra, learned counsel appearing for the assessee supported the impugned order. 7. Section 48 of the Income Tax Act deals with the mode of computation of the capital gains. It provides, the income chargeable under the head capital gains shall be computed by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts, namely:- (i) expenditure incurred wholly and exclusively in connection with such transfer; and (....