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2019 (4) TMI 1015 - ITAT AHMEDABADDisallowance of cost of transfer of the asset - cost of transferring shares of 20 Microns Ltd ('20ML') in 'offer for sale' - IPO issued - assessee is an AOP and engaged in the activity of providing Venture Finance Assistance to Information Technology/Software units located in the state of Gujarat - no prohibition for the assessee to share the cost in the IPO expenses - HELD THAT:- As per the agreement between the assessee and “20 ML”, there was no obligation on the assessee to incur any cost in connection with the transfer of the shares. As such it was the responsibility of “20 ML” to provide an exit route to the assessee for the disinvestment of the shares held by it. In this regard, we note that reimbursement of the expenses was decided in the board meeting of the assessee and after taking the report/opinion from the chartered accountant. As per the report of the chartered accountant there was no prohibition for the assessee to share the cost in the IPO expenses. Therefore even the assessee was not under the obligation to incur such cost, but that cannot be the basis of disallowance of the expenses under section 48 of the Act. The obligation of “20ML” was to provide the exit route to the assessee, but there was no clause or condition that the assessee shall not share the expenses in connection with the transfer. AO cannot sit on the armchair of the assessee to decide/direct the business affairs of the assessee. It is the assessee who knows the best of its business affairs. The role of the AO is to establish whether the expenses were incurred wholly and exclusively in connection with the transfer of assets. There is no ambiguity that the expenses were incurred wholly and exclusively in connection with the transfer of the shares as held by us in the preceding paragraph. Thus, the allegation of the AO that the assessee was not under the obligation to incur the cost for the transfer of shares has no relevance in the given facts and circumstances. We conclude that the assessee is entitled to a deduction under section 48 of the Act, for the expenses incurred wholly and exclusively in connection with the transfer of the shares. Accordingly, we reverse the order of the authorities below. Accordingly, we set aside the order of the Ld.CIT (A) and direct the AO to delete the addition made by him. - Decided in favour of assessee.
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