AI Drafter 
TaxTMI 
TaxTMI 
2009 (9) TMI 989
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....me was assessed under the provisions of section 143(3) of the Income-tax Act, 1961 (for short, the 'Act'). The assessment order was framed on 28-2-2005, as per which the Assessing Officer (AO) made the following additions to the income of the assessee :- (a)The Assessing Officer disallowed a sum of Rs. 3,15,000 on account of consultancy charges and added it back to the total income of the assessee. (b)The Assessing Officer also disallowed the claim of Rs. 20,40,000 incurred for buyback of shares and treated the same as capital expenditure of the assessee and, thus, added the same to the income of the assessee. The assessee preferred appeal against this order, which was dismissed by the Commissioner of Income-tax (Appeal....
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....ment made to Mr. B.M. Mirza. On the basis of material placed on record, the Tribunal came to the conclusion that payment of Rs. 3,15,000 was, in fact, made to Mr. Mirza for obtaining the consultancy services in the field of Review of Annual Accounts, Audit Review and Review of Internal Controls, etc. Even the applicable Tax at Source was deducted and paid by the company. The matter placed on record included invoice of Mr. Mirza and Board's Resolution of the assessee's company, in which the Board had noted the relationship of Mr. Mirza that the assessee-company and the benefit of Rs. 3,15,000 derived by him. 3. The Tribunal also accepted the contention of the assessee that corporate governance and related disclosures were made mandatory b....
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....of Institute of Chartered Accountants of England & Wales and vast experience as a financial expert. We feel that for services rendered as an advisor regarding legal compliance, there may not be some documentary evidence as noted by Ld. CIT(A) but since the need of advisory services is shown by pointing out that new SEBI guidelines are made applicable in this year and it is also shown that Mr. Mirza was capable of rendering such services, the claim of the assessee deserves to be allowed in the facts and circumstances of this case." 4. We are of the opinion that the aforesaid finding of fact is based on cogent material and it cannot be termed as perverse nor such an attempt is made by the learned counsel for the Revenue. Since it is a pure....
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....enses were incurred for the buyback of the shares, which is directly related to the capital of the assessee. Therefore, he treated it as capital expenditure. 7. The Tribunal differed with the Assessing Officer and CIT(A) holding that the expenditure in question was not in relation with the share capital of the assessee-company. For coming to this conclusion, the Tribunal has relied upon the judgment of the Supreme Court in the case of CIT v. General Insurance Corpn. [2006] 286 ITR 232 1. In that case, the issue involved was regarding expenses by way of stamp duty and registration for issue of bonus shares. These expenses were also in connection with the capital base of the assessee-company therein. Under these facts, the Apex Court held ....
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....as held in those cases. Further, when the expense incurred in connection with bonus shares, there is no increase in the capital employed, which remains the same. For this reason, and on this distinction, the Court held that such an expenditure would be treated as revenue expenditure/business expenditure as it cannot be such that in that case the company had acquired benefit or addition of enduring nature because the total funds available with the assessee-company would remain the same. 10. It is clear from the aforesaid judgments that a fine distinction is made by the Supreme Court in classifying the expenditure under two categories:- (a)When the expense incurred relates to the issue of fresh shares, which leads to an inflow ....