Case Law Details
Addl. CIT Vs Times Internet Ltd. (ITAT Delhi)
During the year, the assessee claimed an amount of Rs.10.55 crores on account of consultancy fee, out of which an amount of Rs.98.37 lacs has been disallowed by the AO pertaining to the amount paid for legal and professional services. The AO held that since the expenses were incurred for various projects and share acquisition which shall result in enduring benefit to the assessee and hence not allowable as revenue expenditure. The ld. CIT(A) deleted the additions except the amount paid for professional services for project ADONIS. The ld. CIT(A) while upholding the addition opined that the fee has been paid towards review of project ADONIS transaction document, legal & intellectual property right, due diligence, negotiation and such other services taken up in connection with acquisition of strategic investment in a company by the name of “Coupon Duniya” which is hosting a website that is strategically important for the assessee to grow its business and increase traffic and profits. The ld. CIT(A) held that in effect the consultancy charges have been paid towards documentation and advice on acquisition of shares in the said company. Before us, the ld. AR submitted 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 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 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 website 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. Such expenses have been incurred by assessee to seek the advice from the best professionals, this 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.
ITAT find that the expenses are intricately connected with the ongoing business of the assessee and to enhance the profitability. The expenses do not pertain to any creation of new business entity or its operation. Hence, we hold that the expenses on account of consultancy charges are allowable.
FULL TEXT OF THE ORDER OF ITAT DELHI
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