Income Tax Deduction not allowable to Professional and Consultancy Charges paid for Acquisition of Companies: ITAT [Read Order]

Income Tax Deduction - Professional Charges - Consultancy Charges - Acquisition of Companies - ITAT - Taxscan

The Income Tax Appellate Tribunal (ITAT), Bangalore bench has held that the income tax deduction cannot be allowed to professional and consultancy charges paid for the acquisition of the Companies by the assessee, Steer Engineering Pvt. Ltd.

The assessee, a private limited Company acquired the business of two companies called Concord United Products Pvt.Ltd., and M/s.Aditya Precision Deposition Moulding Pvt.Ltd during the relevant year. Towards this acquisition, the assessee incurred Rs.1,20,820/- as professional fees, for drafting business transfer agreements and another professional fee on legal opinions. The assessee claimed it as revenue expenditure which was later disallowed by the department by holding it to be capital in nature.

On the first appeal, the Commissioner of Income Tax (Appeals) upheld the order of the Assessing Officer. Being aggrieved by the orders of the lower authorities, the assessee approached the Tribunal for relief.

Upholding the rulings of the lower authorities, the Tribunal bench comprising Accountant Member B.R Baskaran and Judicial Member Beena Pillai observed that the incurring of expenditure resulted in the acquisition of two companies by the assessee, thereby resulting in the acquisition of capital assets.

Dismissing the plea of the assessee, the Tribunal concluded that “in our view ratio laid down by Hon’ble Supreme Court in Alembic Chemical Works Co. Ltd., Vs. CIT report in (1989) 177 ITR 377 is applicable. The professional and consultancy charges incurred by the assessee for the acquisition of the two companies can’t be treated as revenue in nature.”

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