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2017 (3) TMI 957 - AT - Income TaxAllowable deduction u/s 37(1) - expenditure incurred by the assessee by way of payment to Knight Riders Sports Pvt. Ltd. for obtaining sponsorship rights in favour of Star India Pvt. Ltd - Held that:- The assessee entered into an arrangement with Star India Pvt. Ltd. on a mutually agreed basis whereby the loss suffered by Star India Pvt. Ltd. was sought to be recouped with the earnings from the sponsorship of Kolkata Knight Riders Cricket Team for which assessee incurred ₹ 10 crores on behalf of Star India Pvt. Ltd. In our considered opinion, it is not the legal necessity to spent the expenditure which is determinative of its allowability; rather, it is the existence or otherwise of commercial expediency which guides the allowability of expenditure under Section 37(1) of the Act. From the point of view of commercial expediency, it is abundantly clearly that assessee had a long-standing professional relationship with Star India Pvt. Ltd. and there is a nexus between the impugned expenditure and the purpose of business. The commercial expediency canvassed by the assessee in the instant case clearly establishes that the impugned expenditure falls within the scope of the expression “wholly and exclusively for the purpose of business or profession” within the meaning of section 37(1) of the Act. - Decided in favour of assessee Addition as Professional fee - accrual of benefit / perquisites u/s 2(24)(iv) - Held that:- Proposition made out by Revenue is entirely mis-conceived inasmuch as no such appearances and promotions have indeed been carried out. Further, as per the Revenue because of such an arrangement, assessee has earned a benefit within the meaning of Sec. 2(24)(iv) of the Act. On this aspect also, in our view, the action of lower authorities is completely misdirected and is devoid of any factual support. The Assessing Officer has not been able to establish as to what benefit has been obtained by assessee within the meaning of Sec. 2(24)(iv) of the Act in the instant year as nothing is shown to have been received by the assessee. Therefore, in a nutshell, in our opinion, the addition of ₹ 7 crores made by Assessing Officer is purely on conjectures and surmises and is untenable in law and also on facts. Therefore, on this aspect also, assessee succeeds. Bringing to tax annual value of the Dubai Villa - Held that:- Income from the Dubai Villa is liable to be taxed in India inasmuch as the same is includible in the return of income and whatever taxes that may have been levied in the other contracting State, the credit thereof is required to be allowed as per law. Therefore, in view thereof we hold the issue against the assessee and direct the Assessing Officer to rework the final tax liability in accordance with aforesaid direction. Thus, on this aspect assessee fails on its Ground. Interest under section 234B & 234C which is consequential in nature, and therefore this ground of appeal is dismissed.
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