The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) held that the expenditure of consultancy fees can be treated as revenue expenditure and is eligible for the deduction under section 37 (1) of the Income Tax Act,1961.
KMTC (India) Private Limited, the appellant assessee was engaged in the business of customary agency services of tamper/liner vessels and acted as a husbanding agent in respect of vessels owned, operated, chartered, or managed by Korea Marine Transport Co. Ltd and (KMTC Korea) and also provides auxiliary services like filing shipping documents, completing custom formalities, etc. for the customers of KMTC Korea.
The assessee appealed against the order passed by the Commissioner of Income Tax (Appeals) for confirming the addition of Rs.4,86,368/- towards the delayed deposit of employees’ contribution to Provident Fund and the addition of Rs.3 lacs on account of preliminary expenses and deduction allowed under section 35D of the Income Tax Act.
Tanzil R. Padvekar, the counsel for the assessee contended that the user name and password were furnished only on 01.03.2014, and only after that, the assessee company deposits the employee’s contribution on 11.03.2014 and the delayed deposit of employee contribution was not attributable to the assessee and prayed that the said addition be deleted.
P. D. Chougule, the counsel for the revenue contended that the assessee has not substantiated whether it had applied for the user name registration and password without any delay.
The Bench observed that the expenditure of consultancy fee had been treated as revenue expenditure which is eligible for deduction under section 37(1) of the Income Tax Act and the impugned expenditure will not come under the purview of section 35D of the Income Tax Act and rather would be a revenue expenditure allowable as deduction under section 37(1) of the Income Tax Act.
The two-member bench comprising Kavitha Rajagopal (Judicial) and Prashant Maharishi (Accountant) held that the assessee was eligible for the deduction under section 37(1) of the Income Tax Act.
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