Asia Investments Pvt. Ltd. Vs ACIT (ITAT Mumbai)
Conclusion: Professional fees and foreign branch expenses incurred by a strategic investment company were allowable under Section 37(1) in the absence of any finding that the expenditure was excessive, unreasonable, or non-genuine, and with no distinguishing facts for the year under consideration.
Held: AO relying on findings from assessment year (AY) 2011–12, disallowed professional fees of ₹6 crores paid by assessee-company to Deep C Anand Foundation, treating the payment as unwarranted since payments had already been made to Shri Deep C. Anand in his individual capacity. AO proceeded on the premise that assessee was merely an investment company, entitled only to limited corporate maintenance expenses, and concluded that the expenditure was incurred for managing group companies rather than for the assessee’s own business. The disallowance was upheld by CIT(A). Assessee contended that it was engaged in making and managing strategic investments in group entities and joint ventures, often with foreign collaborators, and that the professional fees were paid for high-level consultancy services essential to its investment business. It was argued that the expenditure was incurred wholly and exclusively for business purposes. Revenue maintained that the assessee failed to substantiate the nature of services rendered or demonstrate any tangible business benefit. It was held that assessee’s business model of strategic investment and management of joint ventures was well established and had been recognised in earlier years. It observed that professional advisory support in such complex investment arrangements was a commercial necessity. Relying on the Tribunal’s own order in AY 2011–12, it was held that the AO could not substitute his judgment for that of the businessman or disallow expenditure merely due to absence of immediate or measurable benefit. In the absence of any finding that the expenditure was excessive, unreasonable, or non-genuine, and with no distinguishing facts for the year under consideration, the disallowance was found to be unjustified.
1. These appeals preferred by the assessee are directed against separate orders dated 20.03.2017, 12.07.2017, and 31.07.2019 passed by the Learned Commissioner of Income-tax (Appeals)–4, Mumbai [hereinafter referred to as “the Ld. CIT(A)”] pertaining to the assessment years 2012–13, 2013–14, and 2014–15 respectively. Since common issues in dispute are involved in all these appeals, same were heard together and are being disposed of by this consolidated order for the sake of convenience and to avoid repetition of facts.
