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2017 (11) TMI 850 - AT - Income TaxAddition u/s 37 (1) on Professional Fees - Held that - The professional fee was incurred for various works including completion certificate at site conditions, attending court matters, and preparation of drawings plan, etc. The ld. CIT(A) has held that the assessee has not explained that the expenditure is not relating to benefit of enduring in nature. I find that no reason whatsoever for this assumption of the ld. CIT(A) is on record. It is clear that the fee paid includes expenditure for attending court matters, etc. This by no stretch of imagination can be considered to be expenditure of enduring benefit. Furthermore, if the expenditure is related to setting up of any property, the expenditure needs to be capitalized and the assessee be accordingly given the depreciation thereon or if the property is under development, the expenditure needs to be added to the cost of the project. Hence, we remit this issue to the file of the A.O. to examine the issue and decide as per the direction given hereinabove. Stamp duty and registration charges - Held that - No mention whatsoever has been given by the ld. CIT(A) for disallowing the expenditure except mentioning that it is not the revenue expenditure. When the assessee had made the expenditure on account of stamp duty and registration charges, as the incentive scheme by duly advertising the same, we do not see any reason as to how the same cannot be treated as revenue expenditure. This expenditure is in relation with the flat which the assessee deals in and the same is its stock-in-trade. Hence, the expenditure related to the sale of the item in which the assessee deals in, can by no stretch of imagination be deemed to be capital expenditure - Thus claim allowed. Interest for delayed payment - Held that - A.O. has made the disallowance by holding that this interest is of penal in nature and cannot be allowed as business expenditure. There is no discussion whatsoever as to how this is penal payment, not allowable as business expenditure. The ld. CIT(A) has upheld the disallowance by observing that this cannot be treated as compensatory in nature. This observation by the ld. CIT(A) is absolutely mechanic and does not speak anything. When the assessee is paying the creditors interest for payment made beyond the credit period allowed, the expenditure is undoubtedly in relationship to the business conducted by the assessee. Hence, the same is duly allowable
Issues Involved:
1. Disallowance of professional fees under section 37(1) of The Income Tax Act, 1961. 2. Disallowance of stamp duty and registration charges. 3. Disallowance of interest on delayed payments to parties. Analysis: Issue 1: Disallowance of Professional Fees - The Assessing Officer (A.O.) disallowed professional fees of ?10,52,000, stating it was not revenue expenditure under section 37(1) of the Income Tax Act. - The Commissioner of Income Tax (Appeals) upheld the disallowance, considering the expenses to be of enduring benefit. - The ITAT remitted the issue back to the A.O., noting that the fees included various works not related to enduring benefit, such as attending court matters, and should be examined further. Issue 2: Disallowance of Stamp Duty and Registration Charges - The A.O. disallowed stamp duty and registration charges without providing reasons. - The Commissioner of Income Tax (Appeals) upheld the disallowance, stating the expenses were not revenue expenditure. - The ITAT disagreed, finding the expenses related to the flat sales and were part of the stock-in-trade, thus allowing the expenses. Issue 3: Disallowance of Interest on Delayed Payments - The A.O. disallowed interest on delayed payments, considering it penal in nature. - The Commissioner of Income Tax (Appeals) upheld the disallowance, stating it was not compensatory. - The ITAT overturned the decision, noting the interest was related to the business conducted by the assessee and allowed the expenditure. In conclusion, the ITAT partially allowed the appeal, remitting the professional fees issue back to the A.O. for further examination, overturning the disallowance of stamp duty and registration charges, and allowing the interest on delayed payments as a business expenditure.
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