2017 (3) TMI 1183

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.... order of the Commissioner of Income Tax (Appeals) [in short, 'the CIT(A)'], dated 23.12.2010, was required to be sustained. 3. The CIT(A) vide order dated 23.12.2010, had reversed the findings of the Assessing Officer, with regard to the disallowance of the expenditure, claimed by the Assessee qua legal fee and the expenses incurred towards Professional Indemnity Insurance. 3.1. To be noted, the Assessee had paid a sum of Rs. 1,93,90,452/- towards legal fees, as also, a sum of Rs. 1,81,327.50 towards Professional Indemnity Insurance to its legal adviser, one Hammonds, U.K. 3.2. The aforementioned amounts were arrived by the Assessing Officer, after applying the then prevalent rate of exchange qua expenses incurred by the A....

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..... "....7.1 The first finding of the Assessing Officer namely, incurring of expenditure of Rs. 1.93 Crores towards legal fees to recover Rs. 80,16,570/- is misconstrued on the facts of the case. The expenses according to the Appellant were incurred to protect the source of income and hence the comparison attempted by the Assessing Officer is not correct. The expenses incurred to protect and maintain the title to the capital assets as well as to protect the source of income is on the revenue field and based on the citations given by the Appellant, I hereby hold that the first facet of the finding of the Assessing Officer is hereby reversed. 7.2. On the second facet, the Assessing Officer had held that there was no material o....

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....K., by the Director of the Assessee company, one, Shri.Brijnath via his personal account. 9. This aspect of the matter was also gone into by the CIT(A), who affirmed the genuineness of the transaction and allowed the deduction qua legal fee by holding that the "modus operandi" of payment was not relevant. 10. The Revenue, being aggrieved, carried the matter in appeal to the Tribunal. The Tribunal, in turn, sustained the view of the CIT(A). 11. Before us, Ms.Hemalatha, learned counsel for the Revenue raises the very same ground to assail the order of the Tribunal. It is the submission of the learned counsel for the Revenue that, since, the legal fee paid was far in excess to the compensation received, the same cannot be allowed as a....

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....ient, i.e., the Assessee. 13.1. Therefore, on both counts, according to us, there is no flaw in the judgment of the Tribunal, as also that of the CIT(A). 14. Before we conclude, we may only indicate that the test to be employed for examining as to whether or not a particular expenditure incurred by an Assessee, be allowed, is that, which is, provided in Section 37 itself. Therefore, what is required to be ascertained is, whether or not, the expenditure in issue is laid out or incurred wholly and exclusively for the purpose of business, and that, it is not an expenditure, which is described under Sections 30 to 36 of the Act, or an expenditure in the nature of capital expenditure or, if, an Assessee is an individual, it involves defray....