M/s. Manipal Health Systems Pvt. Ltd. Vs ACIT (ITAT Bangalore)
It is also an undisputed fact that the project was completed and the appellant has paid services fees of Rs.3,30,90,000/- to Allegro Corporate Finance Advisors Pvt. Ltd. The appellant claimed it to be revenue expenditure under the head legal and professional charges but treated it to be a capital expenditure. The quantum of expenditure incurred by the appellant in obtaining services from Allegro Corporate Finance Advisors Pvt. Ltd., was not disputed by the Revenue. The dispute before us is only with regard to nature of expenditure whether it is a capital expenditure or a revenue expenditure. Before dwelling upon the nature of expenditure, we would like examine the various judicial pronouncements referred to by the parties during the course of hearing. In the case of Alembic Chemical Vs. CIT (supra), the facts of the case are that the business of the assessee from the commencement of its plant was the manufacture of pencillin and after the agreement, the product manufactured continued to be pencillin. The agreement with the foreign firm stipulated the supply of the “most suitable sub-cultures” evolved by the foreign firm for the purpose of augmentation of the unit-yield of pencillin per milli-litre of the culture-medium. In that case, it was held “the improvisation in the process and technology in some areas of the enterprises was supplemental to the existing business and there was no material to hold that it amounted to new or fresh venture. The further circumstance that the agreement pertained to a product already in the line of the assessee’s stipulated business and not a new product indicates that what was stipulated was an improvement in the operations of the existing business and its efficiency and profitability not removed from the area of the day-to-day business of the assessee’s established enterprise. There is also no single definitive criterion which, by itself, is determinative as to whether a particular outlay is capital or revenue. The once for all payment test is also inclusive. What is relevant is the purpose of the outlay and its intended object and effect, considered in a commonsense way having regard to the business realities. Therefore, the payment made for technical know-how fees is allowable as deduction.”
