CIT Vs Sahara Asset Management Company Pvt. Ltd (Madras High Court)
Madras High Court held that ITAT rightly deleted the addition on account of Mutual Fund Promotion Expenditure and Initial Public Offer Expenditure since the said expenses are incurred wholly for the purpose of business and hence the same are allowable expense.
Facts- The assessee is an asset management company acting as fund manager, managing mutual fund schemes. For the Assessment Year 2005-06, assessee had claimed mutual fund promotion expenditure and initial public offer expenditure. AO held that the assessee company is a fund manager for the mutual fund company and the assessee company need not have incurred mutual fund launch expenses and mutual fund promotion expenses. AO, consequently, disallowed the expenses incurred by the assessee and added the same to the total income.
CIT(A) allowed the appeal. ITAT dismissed the revenue appeal. Being aggrieved, revenue has preferred the present appeal.
Conclusion- The Assessing Officer has disallowed the assessee’s claim on the ground that the assessee was a fund manager for the mutual fund company and there was no need to incur the expenses. In our opinion, the Assessing Officer cannot claim to put himself in the arm chair of the assessee and assume the role to decide whether to incur the expenses and how much is a reasonable expenditure, having regard to the circumstances of the case.
