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The Tax Publishers2020 TaxPub(DT) 3373 (Del-Trib) : (2020) 185 ITD 0275 INCOME TAX ACT, 1961
Section 37(1)
Professional charges paid for investment advisory services as regards acquisition of shares of WTTIL, pursuant to scheme of demerger could not be allowed as deductible under section 37(1) because by no stretch of imagination it could be said that assessee was carrying on any business of purchase and sale of securities.
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Business expenditure - Professional charges paid for investment advisory services as regards acquisition of shares of WTTIL, pursuant to scheme of demerger - No business purpose -
Assessee-company claimed deduction of professional charges paid for investment advisory services as regards acquisition of shares of WTTIL. AO disallowed deduction on the ground that as per notes to accounts, it was clear that passive telecom infrastructure of company including all its assets and liabilities were demerged into Wireless TT Info Services Ltd. as a going concern proving that assessee did not have any business. Further, in view of demerged entity, assessee got shares of demerged company. Thus, acquisition of shares of WTTIL was merely a strategic arrangement of business reorganization; it was not a transaction of purchase and sale of securities, which could result into carrying on of activities of purchase, and sale of securities as a business. Held: It was a clear-cut transaction having a character of transaction of acquisition of stake in WTTIL in which telecom business of assessee was demerged. It was the only transaction of purchase of shares during the year. Subsequent sale of those shares to other entities to shareholders of assessee only could not by any stretch of imagination be considered as the fact that assessee was carrying on any business of purchase and sale of securities. Accordingly, disallowance of deduction by AO was justified.
REFERRED :
FAVOUR : Against the assesse
A.Y. : 2010-11
INCOME TAX ACT, 1961
Section 14
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