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TMI Blog2016 (8) TMI 1172X X X X Extracts X X X X X X X X Extracts X X X X ..... he first issue arises for consideration is with regard to disallowance of Rs. 1,93,90,502/- being the fee paid to legal firm at London. According to the Ld. D.R., the assessee engaged in the business of providing outsourcing accountancy services. During the year under consideration, the assessee claimed that a suit was filed against Charter House in United Kingdom. Ultimately, the dispute was mutually settled in September, 2005. The legal proceeding initiated by assesseecompany was assisted by M/s Hammonds UK for which the assessee has paid a sum of Rs. 1,93,90,502/-. Referring to the assessment order, the Ld. D.R. submitted that the assessee claimed that it engaged the services of M/s Hammonds, UK for 643 hours. However, the assessee could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee-company in October, 2004. Since the misuse of software by competing business houses in London affected the business of the assessee, the assessee was forced to initiate legal proceeding against M/s Charter House Accountants LLP. The litigation was mutually settled in September, 2005 and the assessee paid a sum of Rs. 1,93,90,502/- being the legal fee to M/s Hammonds UK. According to the Ld. counsel, the assessee produced all the invoices raised by M/s Hammonds UK and payment details to substantiate the claim of deduction under Section 37(1) of the Income-tax Act, 1961 (in short 'the Act'). The Ld.counsel placed his reliance on the judgments of Madras High Court in CIT v. O.P.N. Arunachala Nadar (1983) 141 ITR 620, CIT v. Rama ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion that the expenditure incurred by the assessee is not on the capital field since it was not to create any capital asset. It was incurred by the assessee for protecting the registered software in the course of its business activity. Therefore, this Tribunal is of the considered opinion that the judgment of Madras High Court in Chelpark Company Limited (supra) may not be applicable to facts of the case. 5. The next contention of the Ld. D.R. is that the assessee has paid to M/s Hammonds UK for 643 hours and the payment was made on hourly basis. It is not in dispute that even in this country, some of the legal practitioners charging from the respective clients on hourly basis. Some of them are charging on day basis. Therefore, it depends ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o disallowance of Rs. 1,87,327/- being the premium paid for professional indemnity insurance. 8. Shri M. Murugaboopathy, the Ld. Departmental Representative, submitted that the assessee claimed payment of premium to M/s Windsor PL UK towards professional indemnity insurance payable every year as per UK laws. The assessee has not produced copies of bill for payment of insurance premium. Moreover, it is for the legal firm to pay the professional indemnity insurance premium and not for the assessee. In the absence of any documentary evidence to substantiate the claim of expenses, the Assessing Officer has rightly disallowed the claim of the assessee. 9. On the contrary, Shri S. Sridhar, the Ld.counsel for the assessee, submitted that the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on under the UK law that only the legal firm has to pay the professional indemnity premium, in view of the assurance given by the assessee to meet the expenditure for insurance premium, this Tribunal is of the considered opinion that such premium would form part of the payment made by the assessee towards fees. Therefore, it has to be naturally treated as expenditure for meeting the legal litigation initiated in the UK for preventing the misuse of registered software. In those circumstances, this Tribunal is of the considered opinion that the CIT(Appeals) has rightly allowed the claim of the assessee. This Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed. 11. In the re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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