Professional and consultancy charges incurred for acquisition of companies cannot be treated as revenue expenses
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Case Details: |
Steer Engineering Pvt. Ltd. vs. ACIT |
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Appeal No.: |
ITA No. 2070/BANG/2018 |
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Order pronounced by: |
ITAT Bangalore |
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Date of order: |
22-07-2021 |
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Assessment Year: |
2010-11 |
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In Favour of: |
Revenue |
Brief Facts:
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The assessee submitted that during the relevant year, it acquired the business of two companies. Towards this acquisition, the assessee incurred Rs. 1,20,820/- as professional fees, for drafting business transfer agreements and other professional fees for legal opinions. The assessee claimed it as a revenue expenditure which was disallowed by the Ld. AO by holding it as a capital expenditure. The view of Ld. AO was also upheld by the ld. CIT(A) against which the aggrieved assessee preferred an appeal before Tribunal. |
Observations & Ruling of Tribunal:
The incurring of expenditure resulted into acquisition of two companies by assessee, thereby resulting in acquisition of capital assets. In our view, ratio laid down by the Hon’ble Supreme Court in Alembic Chemical Works Co. Ltd. vs. CIT reported in (1989) 177 ITR 377 is applicable in this case. Hence, the professional and consultancy charges incurred by assessee for acquisition of the two companies cannot be treated as revenue in nature.
Read Complete Order: Steer Engineering Pvt. Ltd. order
