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Vaipa Pharmaceuticals Pvt Ltd Versus ACIT, Mumbai

Disallowance of legal costs on account of fees paid to M/s. AZB & Partners - capital gain computation - Held that:- The undisputed facts brought before us are that legal fees has been paid to M/s AZB & Partners (advocates and solicitors) for protecting the investment of the assessee with Zandu. Further, an admitted fact is that as a result of the aforesaid legal exercise, the assessee earned larger amount of capital gains as initial open offer of ₹ 7,315/- per share was eventually enhanced .....

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tances, we do not find any hesitation in holding that these expenses should be added to the cost of shares as cost of improvement. The AO is directed to recompute the amount of capital gain earned by the assessee. - Decided partly in favour of assessee - ITA No. 5226/Mum/2012 - Dated:- 20-1-2016 - Sanjay Garg, JM And Ashwani Taneja, AM For the Appellant : Shri Rashesh V Parekh (AR) For the Respondent : Shri Sanjeev Kashyap (DR) ORDER Per Ashwani Taneja ( Accountant Member ) This appeal has been .....

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ot spent the said amount to earn exempt income. 2. Commissioner of Income Tax (A) has erred in concurring with the Assessing , Officer in treating the legal expenses of ₹ 1,85,10,887/- as of capital nature/ and not allowing as business expenses u/s.37(1) of the Income Tax Act 1961. ' 3. Without prejudice to Grounds of Appeal No.1 and No.2 the legal expenses as incurred by assessee company should have allowed as expenses to earn capital gain and Commissioner of Income Tax (A) earned in .....

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al costs on account of fees paid to M/s. AZB & Partners. 3.1. The brief facts noted from the records brought before us are that during the year under consideration the assessee company was engaged in the manufacture and processing of Ayurvedic medicines. The assessee company had a substantial stake in M/s Zandu Pharmaceutical Works Ltd. (in short Zandu). During the year under consideration, one Emami Group acquired substantial holding of Zandu, and as required under SEBI Law, it was required .....

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over price was increased to ₹ 16,500/- per share, thereby leading to a significant increase in capital gains income of the assessee company for ₹ 17.05 Crores, approximately. For fighting this legal battle, the assessee company availed the benefit of professional services of M/s AZB & Partners and paid fee for the leagal services availed by it. The fee so paid was claimed as legal expenses. But AO disallowed these expenses by invoking the provisions of section 14A on the ground .....

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y irrational, as no person would incur such huge expenses to merely safeguard their dividend income. The legal fees were paid to safeguard the investment made by the assessee. It was further submitted that the assessee wanted to protect its business with Zandu. Thus, the impugned expenses have been incurred to maintain the business and to protect the investment. It should be allowed as revenue expenditure. Alternatively, it can be allowed to be added to the cost of shares towards cost of improve .....

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enditure incurred by the appellant in relation to their interest in Zandu Pharmaceuticals Works Ltd. (ZPWL)- is liability of ZPWL-borne by the appellant-is correct because the expenditure of ₹ 1,85,10,887/- has been shown by the appellant to have been incurred by him-since, M/s. ABZ & Partners have in letter dated 31.03.2009 required the appellant to make payment of this bill- which clearly show that this expenditure relates to the appellant. Hence, to this extent only- the plea of the .....

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