The Gujarat High Court has held that the lawyer fee / legal assistance expenditure taken by the assessee on day to day basis for the purpose of business can be treated as revenue expenditure, deductable from Taxable Income.
According to the facts, the disallowance towards interest expenditure was worked out to Rs.2,77,28,566/- by applying the formula under Rule 8D(2)(ii). A disallowance of Rs.1,21,69,984/- was made towards administrative and managerial expenses by applying the formula under Rule 8D(2)(iii) of the IT Rules. The aggregate disallowance was thus worked out to Rs.3,98,98,550/-.
The division bench comprising of Justice J.B Pardiwala and Bhargav D. Karia observed that Section 14A elaborates as an Expenditure incurred in relation to income not includible in total income.—For the purposes of computing the total income under this Chapter, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under this Act.’
The court also observed that, regarding professional fees component of Rs.21,98,169/ disputed by the Revenue, bench finds that CIT(A) has observed that such expenditure has been incurred for legal assistance taken by the assessee on daytoday basis for the purposes of business.
While dismissing th Court further observed that, expenditure incurred on legal fees/ lawyer fee in our view has been rightly treated as revenue expenditure by CIT(A).
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