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ITAT allows Deduction on Legal and Professional Fees incurred to improve day to day working of Company [Read Order]

ITAT Legal Deduction - Legal Professsional Fees - Taxscan

The Income Tax Appellate Tribunal (ITAT) of Ahmedabad held that General Deduction allowable on Legal and Professional Fees incurred for the improvement of day to day working of Company.

During the course of assessment proceedings, the AO observed that the appellant has incurred an amount of Rs. 6,00,00,000/- on account of legal and professional fees paid to one M/s. Emerging India Investment Advisors Pvt. Ltd.

It was further found by the Ld. AO that such expenditure has been incurred for the preparation of feasibility study for improvement and set up of coal logistic business in terms of the agreement by and between the appellant and the service provider.

It was observed that such a feasibility study would primarily involve a feasibility study for setting up of new facilities or services. Such expenditure, according to the AO is covered under the provision of Sec. 35D and the same should be amortized to the extent of 1/5th of the expenditure during that year.

On that basis 1/5th of the said expenditure to the tune of Rs. 6,00,00,000/- to Rs. 1,20,00,000/- was allowed as a deduction and balance of Rs. 4,80,00,000/- was added to the total income of the assessee to be amortized in subsequent years. In an appeal, the addition was deleted by the CIT(A), Hence, Revenue AO is before the Tribunal.

The Tribunal comprising of Judicial Member, Madhumita Roy, and Accountant Member, Waseem Ahmed pronounced the judgment on an appeal filed against M/s. Adani Logistics Ltd.

The Tribunal observed that the appellant has incurred the expenditure for improving its coal logistic and the genuineness whereof has not been doubted by the AO when the said expenditure is allowable as revenue expenditure in one year without differing the same for a further period of 5 years or so on.ITAT allows Deduction on Legal and Professional Fees incurred to improve day to day working of Company

The Tribunal also observed that the nature of expenditure was for the improvement of the regular day-to-day working of the assessee-company and wholly and exclusively for the business purpose. The entire expenditure ought to have been allowed by the AO as revenue expenditure.

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