The Delhi bench of Income Tax Appellate Tribunal (ITAT) recently held that payment of monthly retainership fees to Chartered Accountants is not capital in nature.
Assessee Drishti Soft Solutions Pvt is a company engaged in the business of software development. Assessee electronically filed its return of income and the case of the assessee was selected for scrutiny and, thereafter, assessment was framed under section 143(3) of the Income Tax Act 1961 then the total income was determined at Rs 24 crore.Against the order of assessing officer assessee preferred appeal before Commissioner Of Income Tax Appeal CIT (A) and granted substantial relief to assessee. Against the order of deleting the addition of Rs.1,36,000/- under section 37(1) of the Income Tax Act 1961 revenue filed appeal before the ITAT.
section 37(1) of the Income Tax Act 1961 provides that any expenditure expended for the purpose of business or profession such expense shall be considered for computing the income chargeable under the head of profit and gains of business or profession.
K. M. Gupta, A counsel for the assessee submits that Chartered accountant Vineet K. Gupta & Co. was engaged on monthly retainership basis to provide necessary assistance to the company in the course of due diligence of Company to be carried out for the investor by nominated partners from time to time.Further expenses was incurred wholly or exclusively for the purpose of business and no new asset was created. Hence the expenses were fully allowable under section 37(1) of the Income Tax Act 1961
T. James Singson counsel for the revenue contended that the expenses are not in the nature of routine business expenses but in the nature of capital expenses.
After considering the contentions of the both parties the division bench of ITAT comprising Anil Chaturvedi (Accountant) and. Yogesh Kumar US, (Judicial Member) dismissed the appeal filed by the revenue and observed that the payment is towards the professional fee, which include monthly retainership fees for the professional services. CIT(A) after considering the submissions made by assessee has given a finding that the expenses claimed by the assessee have been incurred during the regular course of business and cannot be treated as capital expenses hence the order of the CIT(A) was correct .
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