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TMI Blog2024 (8) TMI 1165X X X X Extracts X X X X X X X X Extracts X X X X ..... all these payments together with the purpose of payments are duly covered by documentary evidences. All the payments are made by regular banking channels after due deduction of tax at source and the payees are identifiable. The assessee on its part had duly filed the details of payments, purpose of payments, name and address of the advocates, TDS details, details of litigation, court papers and the relevant court orders. None of the payments fall under the ambit of provisions of Explanation 1 to Section 37 of the Act. They are neither penal in nature nor capital or personal in nature. In our considered opinion, the entire payments made are only mere payments made to advocates for defending the case of the assessee company. This is similar to a lawyer being paid fees for appearance before the Tribunal, Commissioner (Appeals) or before the AO in connection with income tax dispute of the assessee company. Hence they are squarely allowable as deduction. We direct the ld. AO to allow deduction to the assessee. - SHRI SAKTIJIT DEY, VICE PRESIDENT AND SHRI M. BALAGANESH, ACCOUNTANT MEMBER For the Appellant : Dr. Rakesh Gupta, Adv., Shri Deepesh Garg, Adv For the Respondent : Shri S. L. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny. The ld. AO observed that the expenses are incurred in respect of the ownership of the firm and takeover of its business assets and liabilities which is a capital expenditure as well as personal expenses amounting to be Rs 2,80,788/- cannot be allowed as expenses wholly and exclusively for business purposes. 4.1. Further the assessee also incurred legal expenses of Rs 3,76,069/- on case filed under PNDT Act instituted by the State Government against the assessee company and two of its directors. The assessee explained that the case was filed for short comings in maintenance of record and penalty of Rs 10,000/- was imposed which may be disallowed. The ld. AO observed that on perusal of the order of the Hon ble Chief Judicial Magistrate, Faridabad that the case was filed on a compliant u/s 28 of the PNDT (Prohibition of Sex Selection) Act, 1994 and the assessee company was convicted u/s 23 of the said Act. Hence the entire expenditure incurred thereon would only have to be construed as expenditure in the nature of an offence or penalty for violation of law for the time being in force as per Explanation to Section 37 of the Act and hence to be disallowed. 4.2. Similarly legal expen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T Act Incidental Exp. In curred in the PNDT Matter 191,012 21,011 17,000 1,870 The appeal filed before Faridabad Court against the order of PNDT authority 6.1. Similarly payment made to Advocate Shri Praveen Sharma of Rs 3,76,069/- is as under:- Details Of legal and professional for the year ended 31st March 2017 Name of party Address Particulars Amount TDS Remarks M/s. Praveen Sharma H no. 1753 Sector 16, Faridabad Fee of case under PNDT Act Incidental Exp. In curred in the PNDT Matter 191,012 21,011 17,000 1,870 The appeal filed before Faridabad Court against the order of PNDT authority 6.2. Similarly payment made to Advocate Shri Ram Kumar Gupta of Rs 1,79,776/- is as under:- Details Of legal and professional for the year ended 31st March 2017 Name of party Address Particulars Amount TDS Remarks M/s. Praveen Sharma H no. 1753 Sector 16, Faridabad Fee of case under PNDT Act Incidental Exp. In curred in the PNDT Matter 191,012 21,011 17,000 1,870 The appeal filed before Faridabad Court against the order of PNDT authority 6.3. The ld. AR drew our attention to the submissions made by the assessee before the lower authorities which are reproduced hereunder:- a) That the AO has disall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he suit was filed by the State (through District Appropriate Authority (PNDT)- cum- Civil surgeon, Faridabad) vs. QRG Central Hospital and Research Centre, 69, Sector 20-A, near Neelam Flyover, Ajronda Chowk, Faridabad, through its Directors, Dr. Nirmesh Verma, Radiologist, 69, Sector 20-A, near Neelam Flyover, Ajronda Chowk, Faridabad and Dr. Gagan Sharma, Radiologist, 69. Sector 20-A, near Neelam Flyover, Ajronda Chowk, Faridabad, through its Directors in respect of complaint filed u/s 28 of Pre- Conception and Pre-Natal Diagnostic Techniques (Prohibition of Sex Selection) Act, 1994 and Amendment 2002 Rules made their under. In the said case, it was held by the Hon'ble Court that some irregularities were found in the maintenance of records and directed that the office of the Civil Surgeon Faridabad should monitor the maintenance of record of the accused no. I hospital on monthly basis for at least 3 months. The Hon'ble Court further held that the authorised representative is sentenced to the simple imprisonment till rising of court hours and to pay a fine of ₹ 10000/-. That in the above case, some irregularities were found in the maintenance of records only. The Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been made by the assessee in the form of any penalty and that no penalty had been levied by any statutory authority for violation of any law for the time being in force. All the aforesaid payments are made only to the advocates who are defending the assessee company in the ordinary course of its business. These expenses are nothing but expenses incurred to protect the image of the assessee company and for ensuring the smooth conduct of the business of the assessee company. None of the explanations given by the assessee hereinabove were found to be false by the revenue and that all these payments together with the purpose of payments are duly covered by documentary evidences. All the payments are made by regular banking channels after due deduction of tax at source and the payees are identifiable. The assessee on its part had duly filed the details of payments, purpose of payments, name and address of the advocates, TDS details, details of litigation, court papers and the relevant court orders. None of the payments fall under the ambit of provisions of Explanation 1 to Section 37 of the Act. They are neither penal in nature nor capital or personal in nature. We find that the ld. AR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued the tenancy. The Tribunal, therefore, held that the assessee was entitled to the deduction of the sum of Rs. 10,000 in computing its business income. The following question has been referred to this court for its opinion. Whether, on the facts and in the circumstances, the Tribunal was right in law in holding that the sum of Rs. 10,000 was a business expenditure of revenue nature entitled to deduction in computing the total income of the asssssee-company? We are in full agreement with the view taken by the Tribunal. As pointed out by it, the assessee-company was the tenant of the premises in question. The tenancy rights were very valuable rights and what all the company did was to defend and protect the existing rights. As a result of the expenditure, the assessee-company did not acquire any asset or enduring advantage. The principles in this respect are too well settled to require repetition. Suffice it to say that we agree with the view of the Tribunal and answer the question referred to us in the affirmative and in favour of the assessee. The assessee will be entitled to its costs. Counsel's fee Rs. 250. 6.6. In our considered opinion, the entire payments made in the sum ..... X X X X Extracts X X X X X X X X Extracts X X X X
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