TMI Blog2021 (10) TMI 400X X X X Extracts X X X X X X X X Extracts X X X X ..... or did they give any enduring benefit to the assessee - expenses incurred relating to carrying on of business more effectively in the ordinary course of business even if, expenses are incurred which are related to capital account cannot be considered as capital in nature, more particularly, when the assessee has incurred said expenditure after commencement of business in the ordinary course of its business activities. This legal position is clarified by CBDT vide Circular No.10 dated 18.06.1964, where it has been clarified that professional charges incurred for running business more effectively cannot be treated as capital in nature. As regards website development expenses, we find that in the case of CIT Vs. India Visit Com Pvt. ltd. [ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case and is therefore unsustainable. 2) The Learned C.I.T (A)- 13 ought not to have sustained the addition of ₹ 1,24,56,952/- made by the Assessing Officer as capital expenditure. 3) The C.LT(A) - 13 ought to have appreciated the fact that the Legal and professional charges disallowed by the learned assessing officer includes due diligence fees, consultation fees for drafting investment agreements and fees for raising capital / debentures which are essential / critical for expanding operations and network of the Company across various rural areas / states in India. 4) The C.I.T (A) -13 ought to have appreciated the fact that that all the expenses related only to the running of the business. The expenses did not resu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed as deduction and hence, made addition of ₹ 1,24,56,952/-. 4. Being aggrieved by the assessment order, the assessee preferred an appeal before CIT(A). Before the learned CIT(A), the assessee has reiterated its arguments taken before the Assessing Officer and submitted that legal and professional charges incurred after commencement of business, even if expenses are incurred which related to capital assets, needs to be allowed as deduction, because while incurring said expenses the assessee does not acquire any capital asset and further expenses incurred does not give enduring benefit. The learned CIT(A), after considering relevant submissions of the assessee and also taken note of various facts brought out by the Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne through orders of the authorities below. It is an accepted position of law that an expenditure which confers benefit to the business for a long period is considered to be capital expenditure. Further, it has been clarified by the Courts that benefits to the business should not be transitory, but should be of an enduring nature. If this advantage obtained as a result of incurring expenditure consists merely of facilitating business operation or enabling management or conduct of business to be carried on more effectively, then expenditure has to be considered as revenue expenditure. If you examine nature of expenses incurred by the assessee in light of above legal position, one has to understand whether by incurring said expenditure the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon ble Delhi High Court in the case of CIT Vs. India Visit Com (2009) 176 taxman 164 has held that website development expenses is revenue in nature. From the above, it is very clear that any expenditure incurred for obtaining advise on industrial, finance or legal matters are considered to be allowable as deduction, if such expenditure is incurred in connection with running of business of the assessee. In this case, if you go through nature of expenses incurred by the assessee including professional fees paid for incorporation of company, purchase of share transfer stamps, consultation fees paid for drafting investment agreement, professional fees paid for structuring various documents and due diligence for investment agreement are defini ..... X X X X Extracts X X X X X X X X Extracts X X X X
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