INCOME TAX ACT, 1961

Section 37(1) Section 35D

Business expenditure - Legal and profesional fees paid for preparation of feasibility study for improvement of existing business - AO invoked section 35D - No expansion of business

Assessee claimed deduction of Rs. 6 crores on account of legal and professional fees paid for preparation of feasibility study for improvement. coal logistic business such expenditure, accoridng to AO was covered under section 35D to be amortized to the extent of 1/5th of the expenditure during that year. On that basis 1/5th of the said expenditure to the tune of Rs. 6,00,00,00,000 to Rs. 1,20,00,000 was allowed as a deduction. Accordingly, AO allowed 1/5th of the expenditure during concerned year and balance was added to total income of assessee to be amortized in subsequent years.Held: Assessee incurred concerned expenditure for improvement of regular day-to-day working of assessee-company for improvement of Coal logistic business and since assessee was already in such business, professional fees paid could not be considered as expenditure for extension of existing business and hence section 35D was not applicable. Accordingly, AO was directed to allow entire expenditure under section 37(1) during the concerned year.

Relied:Taparia Tools Ltd. (2015) 55 taxmann.com 361 (SC) : 2015 TaxPub(DT) 1438 (SC), Pan India Food Solutions Pvt. Ltd. (2014) 53 Taxmann.com 520 (Mum-Trib) : 2014 TaxPub(DT) 3303 (Mum-Trib).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2015-16

INCOME TAX ACT, 1961

Section 14A Rule 8D

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