Professional Fee paid to EY Deductible as Business Expenditure: ITAT [Read Order]

The Income Tax Appellate Tribunal ( ITAT ), Mumbai bench has held that professional fee paid to Earnest & Young deductible as business expenditure.

The assessee Anchor Health & Beauty Care Pvt Ltd is a manufacture and trader of toothpaste and soaps. While processing the income tax returns filed by the assessee, the Assessing Officer disallowed the fee paid towards professional fees for business transformation to Ernst & Young during financial year 2014-15. Assessee approached the CIT(A) contending that the said expenditure was incurred for the transformation of business as a whole resulting in benefit of enduring nature to the assessee company thereby treating the same as capital expenditure.

The AR Shri M. Subramanian for the assessee contended that “it is trite to consider the nature of services rendered by Ernst & Young to the assessee company in order to determine the issue whether the impugned expenditure would fall under capital expenditure or revenue expenditure”. And he reiterated that “these are in the nature of revenue expenditure and does not have any enduring benefit to the assessee company”

The DR Shri Manoj Sinha for Commissioner of Income-tax (Appeals)- contented that “the expenses are in the nature of revenue expenditure, then the same should have been claimed by the assessee in the impugned year only and not spread over three years”.

 After considering the contetion  of the both side the division bench of  Tribunal compraising Smt. Kavitha Rajagopal (Judicial Member) and Shri B.R Baskaran (Accountant Member) observed that “expenses incurred by the assessee as professional fee to Earnest & Young is in the nature of revenue expenditure as opposed to capital expenditure”.

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