The Tax Publishers2020 TaxPub(DT) 2583 (Mum-Trib)

INCOME TAX ACT, 1961

Section 37(1)

Where assessee incurred expenditure such as professional fees, legal charges, due diligence fees, etc., which resulted in acquisitions, same formed part of cost of investment, i.e., capital expenditure, on other hand expenditure incurred in respect of acquisitions, which did not materialize were revenue expenditure.

Business expenditure - Allowability - Expenditure incurred in relation to acquiring entities engaged in similar business -

While expanding operation bars/manufacturing activities, assessee incurred expenditure on acquiring entities which were engaged in similar business in India as well as overseas. For this purpose, it incurred expenditure such as professional fees, legal charges, etc., which were disallowed holding the same to be capital in nature. Held: Expenditure which resulted in acquisitions, should form part of cost of investment, thus, could be added to cost of investments and was to be treated as capital expenditure which assessee could claim as cost at time of sale of investment. On other hand, expenditure incurred in respect of acquisitions, which never materialised should be allowable as revenue expenditure, inasmuch as no capital asset came into existence which would derive enduring benefit of assessee.

REFERRED :

FAVOUR : Partly in assessee's favour

A.Y. :


INCOME TAX ACT, 1961

Section 37(1)

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