TMI Blog2019 (11) TMI 465X X X X Extracts X X X X X X X X Extracts X X X X ..... olitan Magistrate Court has been made against the Directors / Shareholders in individual capacities. The entire dispute between the various group of shareholders was only to acquire the management and control of the appellant company and, therefore, these expenses are not expenses incurred for and on behalf of the company but expenses incurred for the Directors / Shareholders for their individual benefit so as to retain control and management of the appellant company. Tribunal has observed the fact that legal proceedings were also commenced against its Auditors / Company Secretary were only on off-shoot of the inter se dispute between different shareholders of the appellant company. Assessing Officer as well as the CIT(A) recorded the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenses is justified when the Tribunal has proceeded on erroneous factual basis that it was not shown that the Directors / shareholders were subjected to legal proceedings in connection with the activities carried out by them during the normal course of carrying on business of the Appellate Company? (iii) Whether on the facts and in the circumstances of the case and in law, the order of the Tribunal is perverse in as much as it is based on extraneous, impermissible and irrelevant considerations, while ignoring the relevant material and considerations? (iv) Without prejudice to the above and in any event, whether on the facts and in the circumstances of the case and in law, the Tribunal ought to have allowed appropriate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n respect of complaints filed against them by another group of Shareholders. Thus, holding in its order dated 31st December, 2017 passed under Section 143(3) of the Act that the legal expenses of ₹ 11.72 lakhs cannot be allowed under Section 37 of the Act and added the same to determine the taxable income. 4. Being aggrieved with the order dated 31st December, 2017, the respondent filed an appeal to the Commissioner of Income Tax (Appeals)[CIT(A)] amongst other issues, one was the issue of disallowance of legal expenses of ₹ 11.72 lakhs. By an order dated 10th December, 2009, the CIT(A) dismissed the respondent s appeal on the issue of legal expenses. This on a finding of fact that there was a dispute inter se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted to legal proceedings in connection with their activity of carrying out the business of the appellant company. Thus, upholds the view of the lower authority that these expenses were not be allowed as an expenditure under section 37 of the Act for carrying out the business of the appellant company. 6. Being aggrieved by the impugned order dated 28th September, 2016 which is a common order for all the four subject assessment years, the appellant has filed three appeals. 7. Mr. Joshi, learned Counsel appearing in support of the appeals submits that these legal expenses have been incurred by the appellant company in protecting the Shareholders / Directors as well as the company in criminal proceedings as well as proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against its Auditors / Company Secretary were only on off-shoot of the inter se dispute between different shareholders of the appellant company. In fact, this Court while admitting a criminal Writ Petition bearing No. 2052 of 2004 on 27th April, 2005, did inter alia observe that the complaints have been filed so as to settle personal scores between the parties. It thus noticed that the appellant company was no way involved in the legal proceedings taken against the Directors / Shareholders in their individual capacities. Moreover, it is pertinent to note that the Assessing Officer as well as the CIT(A) recorded the fact that the details of the nature of the legal expenses was not forthcoming from the appellant. In the aforesaid facts, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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