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| The Tax Publishers2019 TaxPub(DT) 7562 (Bom-HC) : (2020) 424 ITR 0267 : (2020) 272 TAXMAN 0160 INCOME TAX ACT, 1961
Section 37(1)
Where legal expenses incurred by assessee were not for the purpose of carrying out its business and entire dispute between the various group of shareholders was only to acquire the management and control of the appellant company and, therefore, these expenses were not expenses incurred for and on behalf of the company, therefore, appeal of assessee was not entertained.
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Business expenditure - Disallowance of legal expenses - Allowability -
Issue arose under consideration as to whether order of Tribunal disallowing legal expenses was justified when Tribunal had proceeded on erroneous factual basis that it was not shown that the Directors/shareholders were subjected to legal proceedings in connection with the activities carried out by them during the normal course of carrying on business of Appellate Company. Held: Legal expenses incurred by assessee were not for the purpose of carrying out its business and, therefore, was not allowable as expenditure under section 37. The entire dispute between the various group of shareholders was only to acquire the management and control of appellant company and, therefore, these expenses were not expenses incurred for and on behalf of company but expenses incurred for Directors/Shareholders for their individual benefit so as to retain control and management of the appellant company. AO as well as CIT(A) recorded the fact that details of the nature of legal expenses was not forthcoming from assessee. Thus, appeal of assessee was not entertained.
REFERRED :
FAVOUR : Against the assessee
A.Y. :
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