ECL FINANCE LTD,MUMBAI vs. DCIT RG 3(1), MUMBAI

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ITA 6613/MUM/2011Status: DisposedITAT Mumbai03 August 2016AY 2008-093 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal found that the additional evidence submitted by the assessee was vital. Therefore, the issue was restored to the Assessing Officer for fresh adjudication, considering the additional evidence.

What were the facts?

The assessee, engaged in financing, claimed a deduction for professional fees paid for assistance in documentation related to investment. The Assessing Officer disallowed the expense, considering it incurred for raising share capital and not for business purposes.

What were the issues?

Whether professional fees paid for documentation assistance related to investment in the company are allowable as a business expenditure.

Which sections of the Income-tax Act were involved?

Section 143(3)

AI-generated summary — verify with the full judgment below

Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा लेखा सद�य लेखा लेखा सद�य सद�य राजे�� सद�य राजे�� राजे�� केकेकेके अनुसार राजे�� अनुसार अनुसार PER RAJENDRA, AM- अनुसार Challenging the order dated 07.07.11 of CIT(A)-7 ,Mumbai the assessee has filed the present appeal.Assessee-company,engaged in the business of financing, money lending and corporate lending filed its return of income on 28.9. 2008,declaring income at Rs.62.39 crores.The Assessing Officer(AO)completed the assessment on,30.12.2010,u/s.143(3) of the Act,determining the income of the assessee at Rs.62,66,08,920/-.

2.The solitary ground of appeal,raised by the assessee,is about disallowing the claim of deduction of professional fees.During the assessment proceedings,the AO found that the assessee has raised capital from various sources, including raising of funds by issue of shares, that it had incurred expenditure of Rs.15.02 lakhs under the head professional fee paid to Amarchand Mangaldas in relation to the assistance provided for documentation-drafting of agreements etc. to enable Lehman Brothers to invest in the company. He observed that the said expenditure was incurred for raising the share capital and not for the business purposes. He directed the assessee to show cause as to why the aforesaid expenditure should not be disallowed.Vide,its letter dt.20.12.2010,the assessee

6613/M/11 ECL Finance Ltd. argued that the payment made to Amarchand Mangaldas as professional fee was for raising those funds that were used for business purposes.After considering the submission of the assessee,the AO held the payment was made for work related to raising of capital,that the expenditure was not incurred wholly and exclusively for the business purposes.He made a disallowance of Rs.15.02 lakhs.

3.Aggrieved by the order of the AO, assessee preferred an appeal before the First Appellate Authority (FAA).Before him,it was argued that the professional fee was paid for services in drafting of documentation etc. As per the FAA,the assessee had not produced any evidence before him in that regard. Therefore, upholding the order of the AO,he confirmed the addition.

4.Before us,the Authorised Representative (AR)stated that assessee had filed additional evidence in the form of a letter from Amarchand and Mangaldas and Suresh A. Shroff and Co.,that the document could not be produced before the AO/FAA,that additional evidence submitted would affect the outcome of the appeal,that same should be admitted as additional evidences and be considered while adjudicating the issue.Departmental Representative ( DR) left issue to the discretion of the Bench.

5.We have heard the rival submission and perused the material before us.We find the document submitted by the assessee is a vital piece of evidence to decide the controversy before us.Therefore, in the interest of justice, we are restoring the issue to the file of the AO for fresh adjudication. He is directed to afford a reasonable opportunity of hearing to the assessee and consider the additional evidence.Effective ground of appeal,raised by the assessee,is decided in its favour,in part.

6613/M/11 ECL Finance Ltd.

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