Case Law Details

Case Name : PCIT Vs Adani Properties Pvt. Ltd. (Gujarat High Court)
Appeal Number : Tax Appeal No. 02/2020
Date of Judgement/Order : 20/01/2020
Related Assessment Year :
Courts : All High Courts (6127) Gujarat High Court (610)

PCIT Vs Adani Properties Pvt. Ltd. (Gujarat High Court)

The Gujarat High Court has held that the lawyer fee/legal assistance expenditure taken by the assessee on day to day basis for the purpose of business can be treated as revenue expenditure and deductible from Taxable Income.

No Deduction of Expense in relation to income which does not form part of the total income

No deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under this Act.

FULL TEXT OF THE HIGH COURT ORDER / JUDGEMENT

1. This Tax Appeal under Section 260A of the Income Tax Act, 1961 [for short, ‘the Act, 1961’] is at the instance of the Revenue and is directed against the order passed by the Income Tax Appellate Tribunal ‘C’ Bench, Ahmedabad dated 4th July 2019 in the ITA No. 2006/Ahd/2016 for A.Y. 2012­13.

2. The Revenue has proposed the following two questions as the substantial questions of law arising in this Tax Appeal:

“2[A] Whether Appellate Tribunal has erred in law and on facts in deleting the disallowance of Rs. 3,35,83,033/­ made on account of disallowance u/s 14A r.w. Rule 8D of the Act?

[B] Whether Appellate Tribunal has erred in law and on facts in deleting the disallowance of Rs. 21,98, 169/­ being Capital Expenditure?”

3. We are inclined to take into consideration the question No. 2[A], but, after reframing the question. Question No. 2[A], as proposed by the Revenue, is reframed as under:

“Whether the Appellate Tribunal has substantially erred in holding that the disallowance vis­a­vis the administrative expenses incurred under Section 14A of the Act, 1961 cannot exceed the expenditure claimed by the assessee?

4. Although the Revenue wants this Court to go into the question of disallowance of the interest amount, yet we are not inclined to go into such question.

5. So far as the question No. 2[B], as proposed by the Revenue, is concerned, we take notice of the findings recorded by the Tribunal as contained in para 13.1 of the impugned order. Para 13.1 reads thus:

As regards professional fees component of Rs. 21,98,169/­ disputed by the Revenue, we find that CIT(A) has observed that such expenditure has been incurred for legal assistance taken by the assessee on day­ to­day basis for the purposes of business. Such expenditure in our view has been rightly treated as revenue expenditure by the CIT(A). the Ground No.2 of the Revenue’s appeal thus is without any merit.”

6. Thus, there is a concurrent finding recorded by both CIT(Appeals) and as affirmed by the Tribunal that the expenditure has been incurred for the legal assistance taken by the assessee on day­to­day basis for the purpose of business. Such expenditure has been treated as revenue expenditure. We are not inclined to admit this appeal on the question No.2 [B], as proposed by the Revenue. This appeal stands dismissed so far as the question No.2 [B] is concerned.

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