TMI Blog2023 (1) TMI 175X X X X Extracts X X X X X X X X Extracts X X X X ..... ional who have identified the investor, negotiated the value and structured the transaction. Therefore, in our considered view, the transaction has an inextricable nexus with the transfer of shares. The other ground that was urged on behalf of the Revenue is, KPMG had addressed the letter to the Managing Director of the Company and therefore, assessees had no obligation to make the payment. We have perused the engagement letter dated June 20, 2014. The letter is addressed to the Assessees. Thus, this contention is contrary to records and therefore liable to be rejected. In our considered view, the assessees, in accordance with the para 8 of the Articles of Association, have taken services of KPMG and Khaitan Co., and the engagement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted. Out of total 96,000 shares of the said Company, each assessee owned 34,800 shares. They entered into an Agreement with KPMG (KPMG India Private Limited.) and Khaitan Co. Advocates in connection with transfer of the aforesaid shares to M/s MAN Diesel Turbo SE, a Company incorporated in Germany for a consideration of Rs. 58 Crores. 4. The AO (Assessing Officer.) noted that the selling expenses was not incurred wholly and exclusively in connection with the transfer of Capital asset and vide order dated June 04, 2018, under Section 143(3) of the IT Act (Income Tax Act, 1961.), AO disallowed the expenses and made an addition of Rs. 1,18,29,300. The CIT(A) (Commissioner of Income Tax (Appeals).) and ITAT (Income Tax Appellate Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Company and not the Shareholders. To support this contention, Shri Dilip adverted to the Letter of Engagement and pointed out that the engagement was with the Company and therefore, there was no obligation upon the shareholders to make the payment. 7. We have carefully considered rival contentions and perused the records. 8. In substance, Revenue s case is that expenditure incurred towards professional services rendered by KPMG and Khaitan Co. has no nexus with the transfer of shares. 9. The ITAT s view is, as per the engagement letter, KPMG had worked for: preparation of corporate profile; identification of potential investor; negotiation on value; structure and terms of the transaction and coord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts, namely:- (i) expenditure incurred wholly and exclusively in connection with such transfer; (ii) xxx (Emphasis Supplied) 13. The expression in connection has been interpreted in various judgments. 14. In Kaushalya Devi Vs. Commissioner of Income Tax (2018) 404 ITR 136 (Del)., relied by the assessees, the Delhi High Court has held: The word connection in section 48(1) reflects that there should be a causal connect and the expenditure incurred to be allowed as a deduction must be united or in the state of being united with the transfer of the capital asset resulting in income by way of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her shareholders were paid. It is out of the said additional amount he received, he paid a sum of Rs. 2,84,898,000 to MIFL as their charges. The payment is not in dispute. Therefore, that is the amount which the assessee incurred as expenditure for sale of shares. That is the amount which is wholly and exclusively incurred by the assessee in connection with such transfer. (Emphasis Supplied) 16. In the instant case, assessees have engaged the services of professional who have identified the investor, negotiated the value and structured the transaction. Therefore, in our considered view, the transaction has an inextricable nexus with the transfer of shares. 17. The other ground that was urged on behalf of the Revenue is, KPMG ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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