9911796707
TMI Blog2019 (11) TMI 465X X X X Extracts X X X X X X X X Extracts X X X X ..... is a common order relating to Assessment Years 2005-06, 2007-08, 2008-09 and 2009-10. Thus, the four appeals. 2. The appellant assessee has urged the following identical questions of law in all the four appeals :- "(i) Whether on the facts and in the circumstances of the case and in law, the Tribunal erred in disallowing the claim of legal expenses? (ii) Whether on the facts and in the circumstances of the case and in law, the order of the Tribunal disallowing legal expenses is justified when the Tribunal has proceeded on erroneous factual basis that it was not shown that the Directors / shareholders were subjected to legal proceedings in connection with the activities carried out by them during the normal course of carrying on busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer noticed that legal expenses to the extent of Rs. 11.72 lakhs out of Rs. 16.50 lakhs had been claimed in connection with complaints filed by one group of shareholders against the other group of shareholders / directors. The Assessing Officer found on facts that above expenses were incurred not by the company for the purpose of carrying out its business but for the purpose of defending its Directors / Shareholders in respect of complaints filed against them by another group of Shareholders. Thus, holding in its order dated 31st December, 2017 passed under Section 143(3) of the Act that the legal expenses of Rs. 11.72 lakhs cannot be allowed under Section 37 of the Act and added the same to determine the taxable income. 4. Bein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd that the appellant has not shown that the concerned Directors / Shareholders for whom the legal expenses were incurred were subjected to legal proceedings only in view of their conduct in carrying out the appellant's business. Further, it holds that there is nothing on record to indicate that the Directors / Shareholders on whom legal expenses were incurred by the appellant were subjected to legal proceedings in connection with their activity of carrying out the business of the appellant company. Thus, upholds the view of the lower authority that these expenses were not be allowed as an expenditure under section 37 of the Act for carrying out the business of the appellant company. 6. Being aggrieved by the impugned order dated 28th Sept ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he management and control of the appellant company and, therefore, these expenses are not expenses incurred for and on behalf of the company but expenses incurred for the Directors / Shareholders for their individual benefit so as to retain control and management of the appellant company. The Tribunal has observed the fact that legal proceedings were also commenced against its Auditors / Company Secretary were only on off-shoot of the inter se dispute between different shareholders of the appellant company. In fact, this Court while admitting a criminal Writ Petition bearing No. 2052 of 2004 on 27th April, 2005, did inter alia observe that the complaints have been filed so as to settle personal scores between the parties. It thus noticed th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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