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Income Tax Appellate Tribunal, DELHI BENCH “C”: NEW DELHI
Before: SHRI AMIT SHUKLA & SHRI PRASHANT MAHARISHI
O R D E R PER PRASHANT MAHARISHI, A. M.
This appeal is preferred by revenue against the order of the Ld. Commissioner Of Income Tax (Appeals) – 4, New Delhi (Ld. CIT (A)) dated 27/11/2014 wherein the addition made by The Deputy Commissioner Of Income Tax, circle 12 (1), New Delhi dated 31/01/2014 of Rs. 4877182/– made for management overhauling charges is deleted. The Ld. assessing officer held that these expenditure are capital in nature whereas the Ld. CIT (A) has held that these expenditure are revenue in nature and are allowable as Under Section 37 (1) of the Act.
The revenue has raised the solitary ground of appeal, the facts of which are that that in the profit and loss account of the assessee company, legal and professional charges of Rs. 8294955/– were claimed against the earlier year’s expenses of Rs. 2368331/–. Therefore the Ld. assessing officer asked for the detail of the expenses incurred by the assessee during the year which revealed that during the year under reference the assessee company has carried out management overhauling exercise and incurred an expenditure of Rs. 5 419092/–. The Ld. assessing officer on examination of the details held that these expenditure are capital expenditure in nature and therefore he allowed the depreciation at the rate of 10% of these expenditure and made the balance disallowance of Rs. 4877182/–.
3. The assessee ,aggrieved with the order of the Ld. assessing officer preferred an appeal before the Ld. CIT (A) who held that the payments made by the assessee are allowable as revenue expenditure and they are paid for various purposes such as towards sale of carbon emission reductions, to the financial advisor for providing advisory services on smooth transition and on the due diligence fees.
4. The revenue aggrieved with the order of the Ld. CIT (A) has preferred an appeal before us.
The Ld. DR vehemently stated that the assessee has incurred these expenditure for the management overhauling charges which are capital in nature. She vehemently supported the order of the Ld. assessing officer.
The Ld. authorized representative supported the order of the Ld. CIT (A) and took us through the various pages of paper books and explanation filed by the assessee on 22/1/2014 wherein it is stated that these expenditure are revenue in nature. He further stated that assessee has not derived any advantage of enduring nature and therefore it cannot be held to be capital expenditure. He stated that the services are related to the commission on sale of carbon emission reduction which has been included in the revenue. He further referred to the bills of corporate finance advisers for Rs. 26 Lacs and oasis counsel and advisory private limited for legal consultancy Services and stated that these expenditure are for executing agreements between assessee and ILFS and are in nature of consultancy fees.
We have carefully considered the rival contention and perused the orders of the lower authorities. During the year the assessee has sold 37187 units of carbon emission reduction units for which the assessee has shown income of Rs. 4260 8474/–. The assessee has paid success fee @ 5.5% to Emergent Ventures India Private Limited amounting to Rs.
164922/and after the statutory levies the total amount is Rs. 1819092/– which is supported by Bill dated 14/1/2011. In view of this the amount of professional fees paid of Rs. 1 819092/– cannot be held to be capital expenditure. With respect to the bill of the Corporate Finance Advisers dated 17/11/2010 for the lump sum success fee for advisory services for the change of the management. The payment was made to Oasis Counsel In Advisory Private Limited by invoice dated 30/9/2010 of Rs. 10 Lacs. The above expenditure has been incurred for the review of revised shares sale and purchase agreement to be executed between the assessee and ILFS Energy Development Co Ltd. Therefore these are the management overhaul charges which has not resulted into any enduring benefit to the assessee and no assetsahas come in to existence. These are expenditure incurred by the assessee during the course of the business and therefore the allowable as revenue expenditure. The Ld. CIT (A) has dealt with all these expenditure and given his detailed findings. According to him the expenditure incurred by the assessee are allowable under section 37 (1) of the income tax act . The Ld. departmental representative could not point out any infirmity in the order of the Ld. CIT (A). In the result we confirm the finding of the Ld. CIT (A) and dismiss the appeal of the revenue.