Licence fee paid by assessee to group resource company providing centralized resources to all group companies for availing valuable benefits, was allowable as business expenditure

IT : Licence fee paid by assessee to group resource company providing centralized resources to all group companies for availing valuable benefits, was allowable as business expenditure
IT : Where only because of initiation of legal action, interest-free deposits could be collected from tenants, which in turn had benefited assessee's business of leaving and renting property legal expenses would be allowed as business expenditure
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[2014] 49 taxmann.com 318 (Madras)
HIGH COURT OF MADRAS
Commissioner of Income-tax
v.
Spencers and Co. Ltd.*
ELIPE DHARMA RAO AND M. VENUGOPAL, JJ.
T.C. (A.) NO. 1783 OF 2008†
JULY  9, 2013
I. Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of (Licence fee) - Assessment year 2001-02 - Assessee-company paid licence fee to group resource company RPG providing centralised resources to all group companies, for availing valuable benefit - Payment was towards assessee's share of actual expenses incurred by group resource company - Commissioner (Appeals) and Tribunal recorded finding that expenditure was relatable to business expediency - Whether payment of licence fee was allowable as business expenditure - Held, yes [Para 13] [In favour of assessee]

II. Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of (Legal expenses) - Assessment year 2001-02 - Assessee was engaged in business of property development, viz., property leasing, retail trade, etc. - It claimed expenditure on account of legal expenses - Assessing Officer disallowed expenses holding that said expenses having been incurred specifically for dealing with tenants could be only relatable to properties in issue and, therefore, could not be treated as business expenditure - On appeal, Commissioner (Appeals) allowed expenditure finding that it was only because of initiation of legal action that deposits to tune of Rs. 10 crores could be collected, that too as interest-free deposits, which in turn had benefited assessee's business - Whether, on facts, legal expenses would constitute business expenditure wholly and exclusively incurred for purpose of business and, hence, appellate authority rightly deleted addition - Held, yes [Para 21] [In favour of assessee]