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2019 (5) TMI 1208 - HC - Income TaxAllowability of legal & professional fees pertaining to buyback of shares - HELD THAT:- It is clear that expenditure incurred does not include the price paid to share holders for buying back the shares, but it only relates to expenditure incurred for carrying out buyback scheme. Assessee has claimed deduction in respect of expenditure incurred for proceeding of implementation of buyback of shares which would not in any manner enhance the capital structure of the assessee but there is outflow of capital and no deduction is claimed for outflow of capital. Therefore, Tribunal has rightly allowed such expenditure as revenue expenditure. Allowability of club membership fees - Chairman and the Managing Director for increasing its business and business development - HELD THAT:- The Tribunal relied upon the decision of this Court in case of Gujarat State Export Corporation Ltd v. CIT [1993 (9) TMI 52 - GUJARAT HIGH COURT] , wherein the payment of fees to the Sports Club of Gujarat Limited has been examined and it was held that if the expenditure is made for acquiring or bringing into existence an asset or advantage for the enduring benefits of the business, it is properly attributable to capital and is of the nature of capital expenditure. However, if it is made for running the business or working with a view to produce the profits, it is a revenue expenditure. The aim and object of the expenditure would determine the character of the expenditure whether it is a capital expenditure or a revenue expenditure. In view of this test laid down, the court, therefore, held that the payment of entrance fee for becoming a member of the sports club cannot be termed as a capital expenditure. In view of above settled legal position, it cannot be said that the Tribunal has committed any error of law in allowing membership fees paid to club by the Chairman and the Managing Director as revenue expenditure. Allowability of depreciation intangible rights/assets - company had purchased Imidachlorpid business on slump sale - whether manufacturing rights, marketing rights, other commercial rights and other assets relating to development, manufacturing process, registration, use, sale marketing and distribution of product are intangible assets - HELD THAT:- Assets acquired under slump sale were capitalized in books of account as per generally accepted accounting principles in a slump sale several assets are purchased for a consolidated price and price is paid for the entire business as a whole. Hence, value to individual assets cannot be assigned directly. The valuation of Intangible assets and marketing rights have been done in accordance with the Accounting Standard 10 (AS 10) issued by the Institute of Chartered Accountants of India (ICAI) the company has assigned the values to the various assets on a fair basis. The payments made for acquisition of lmidachloropid products business pursuant to transfer of Business Transfer Agreement and intangible assets was allocated on the basis of valuation report from independent valuer M/s. Bansi S. Mehta Et Co. who had assigned the value of individual assets in accordance with AS 10. In view of the findings of fact, arrived at by the Tribunal holding that the assessee having purchased various assets under the business transfer agreement by way of slump sale and further that Mitsu Industries Ltd. was not a related concern as per the provisions of section 40A(2)(b) at the point of sale, depreciation u/s 32 is allowable to the assessee company both on the intangible assets as well as marketing rights. The Tribunal has therefore, not erred in allowing depreciation both on intangible assets as well as marketing rights u/s 32. It is not possible to state that the Tribunal has committed any legal error so as to warrant interference. No question of law, as proposed or otherwise, much less, substantial question of law. The appeal is dismissed.
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