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2022 (5) TMI 324 - AT - Income TaxNature of expenses - legal and professional expenses and other expenses defending the directors and their relatives - treating the same as capital and personal expenditure not pertaining to the business of the assessee - HELD THAT:- Assessee has incurred these expenses by way of legal and professional fee, travelling expenses and staying and boarding expenses in connection defending the matters before the special court. This is also undisputed that the assessee has huge business interest in other entity in which huge investments to the extent of Rs.593/- crores were made by the assessee. Under these circumstances, we are certainly of the belief that if these directors/their relatives are not defended, the business interest of the assessee will be jeopardized and it may be put the assessee to huge financial and commercial losses. As the business of the related concern is not similar to that of the assessee’s business of construction, however, undoubtedly the interest of the assessee is certainly there in the success of these criminal cases in defending its directors/their relatives. Therefore, we are not in agreement with the conclusion drawn by the Ld. CIT(A)/AO that these expenses are not wholly and exclusively incurred for the purpose of business of the assessee and are of capital in nature as the business of Etisalat DB Telecom Pvt. Ltd. has not commenced or personal nature of the directors and their relatives. The expenses incurred even for defending the directors and their relatives in criminal litigations are admissible expenses provided that are incurred in order to protect the business interest of the assessee. As in the case of CIT vs. Ahmedabad Controlled Iron and Steel Reg. Stockholders Association Pvt. Ltd. [1973 (9) TMI 45 - GUJARAT HIGH COURT] held that the money spent in defending the managing director of the assessee company in a criminal prosecution under Essential Commodities Act is an expenditure wholly and exclusively for the purpose of business of the assessee and as such allowable. Appeal of assessee allowed.
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