Relief to Times Internet: Consultation Fee paid to EY Allowable as Expenditure, rules ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Delhi bench, while allowing relief to Times Internet, allowed the consultation fee paid to EY as business expenditure under the provisions of the Income Tax Act, 1961.

The assessee company is engaged in the business of publishing its weekly financial newspaper viz. Financial Times, as well as distribution of newspapers and other publications of Bennett, Coleman & Co. Ltd. and has also earned rental income from subletting of premises.

The assessee was aggrieved by the disallowance made by the AO in respect of consultancy charges paid by the assessee to the Advocate holding it to be capital in nature and approached the Tribunal for relief.

The assessee contended that the assessee has paid professional fee for various composite services including drafting of various documentations, meetings, consultations, discussion, legal and IPR due diligence and closure of deal for the acquisition of strategic investment in a company by the name of Coupon Dunia which is hosting a website that is strategically important for assessee to grow its business and increase traffic, copies of the engagement letter , invoice and copy of voucher showing deduction of TDS and deposit of service tax on reverse charge basis is enclosed. It is further submitted that assessee company is engaged in the business of hosting of the website and is one of the largest websites in India, with a view to continue to grow its revenue as also to protect company from various liabilities, it is business compulsion of the assessee to make strategic investments in other businesses with a view to control their policies which shall be beneficial for the existing business of the assessee.

A bench of Sh. A. D. Jain, Vice President Dr. B. R. R. Kumar, Accountant Member allowed the contentions of the assessee that such expenses have been incurred by assessee to seek the advice from the best professionals, this is on account of business considerations', such expenses should not be viewed as having an enduring benefit and capital in nature.

“That the amount spent on the consultancy in seeking advice, drafting of documentation, and related search work is revenue in nature as no enduring benefit has been driven out of this nor any new asset has been created out of such expenses Incurring such sums is necessary to continue to do the business in efficient and profitable manner as such, such expenses incurred are revenue in nature,” the order said.

Concluding the order, the bench observed that “the amount has been incurred in course of regular business activity in seeking advice with respect to the website Zigwheel in relation to the project walk. Since, the nature of advice sought is in relation to the conduct of regular business, we hold that the amounts are allowable as revenue expenses.”

Sh. Mukesh Gupta, CA & Ms. Neha Gupta, CA appeared for the assessee.

To Read the full text of the Order CLICK HERE

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