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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 ..... ted to misuse the software in the United Kingdom, the assessee had to actually initiate legal proceeding for protecting its interest so that the assessee can carry on the business effectively and profitably. This Tribunal is of the considered opinion 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. Merely because the assessee has paid on hourly basis to engage the service of M/s Hammonds UK for 643 hours that cannot be a reason to disallow the claim of the assessee. It is for the assessee to determine how long hours it has to retain or engage the service of M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... diture 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. - ITA No. 566/Mds/2011 - - - Dated:- 11-8-2016 - SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER Appellant by : Shri M. Muru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the payment claimed by the assessee-company was not genuine. Moreover, the assessee has received only a sum of ₹ 80,16,570/- from the Charter House. Therefore, the expenditure of ₹ 1,93,90,502/- is excessive and no prudent businessman would incur such expenditure for receiving a compensation of ₹ 80,16,570/- Therefore, the Assessing Officer has rightly disallowed the claim of ₹ 1,93,90,502/-. The Ld. D.R. placed his reliance on the judgment of Madras High Court in Chelpark Company Limited v. CIT (1991) 191 ITR 249. 3. On the contrary, Shri S. Sridhar, the Ld.counsel for the assessee, submitted that the assessee-company formed a joint venture with Shri Vinoo Patel. As per the arrangement, Shri Vinoo Patel ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of the assessee-company was used by other competing business concerns in United Kingdom. Therefore, the assessee was forced to initiate legal proceeding. The assessee incurred expenditure for initiating and prosecuting the legal proceeding. Ultimately, the litigation was settled mutually in September, 2005. The question arises for consideration is whether the payment made by the assessee for legal opinion is allowable under Section 37(1) of the Act? The assessee, being a business concern, has to protect its capital base from misuse by other competing business houses. The expenditure incurred by the assessee is not for creating any enduring asset in the course of business activity. It is an expenditure incurred for protecting the register ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o disallow the claim of the assessee. It is for the assessee to determine how long hours it has to retain or engage the service of M/s Hammonds UK. When the assessee has established fact of initiation of legal proceeding and payment of fee, this Tribunal is of the considered opinion that there is no reason to disallow the claim of the assessee. 6. Now coming to the payment made by Shri Brijnath from his HSBC bank account, the fact remains that Shri Brijnath is one of the Directors of the assessee-company. The compensation said to be received from M/s Charter House Accountants LLP was credited in the accounts of the assessee-company and it was also reflected in the Profit Loss account for year ending 31.03.2006. In those circumstances, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... premium, the assessee has paid the premium. The payment of premium is not in dispute. The only objection of the Ld. D.R. is that the assessee is not expected to pay premium and it is for the legal firm to pay the premium for professional indemnity insurance. 10. We have considered the rival submissions on either side and perused the relevant material available on record. Admittedly, the assessee claims ₹ 1,87,327/- being the professional indemnity insurance premium paid to M/s Windsor PL UK. The Assessing Officer disallowed the claim of the assessee on the ground that the payment was not substantiated and the assessee has not proved that the expenditure was for business purpose. The fact remains that the assessee has received a ma ..... X X X X Extracts X X X X X X X X Extracts X X X X
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