- (1.) Following is the substantial question of law raised by the Revenue, while challenging the order of the Income Tax Appellate Tribunal, Bench "C", Ahmedabad ("Tribunal" for short) dated 30th September, 2013, while preferring the present Tax Appeal under Section 260A of the Income-tax Act, 1961 ("the Act" for short). "Whether on the facts and circumstances of the case and in law, the ITAT was justified in deleting the disallowance of expenditure of Rs. 6,60,52,000/- claimed by the assessee, without appreciating that the impugned expenditure was necessitated due to the coming into existence of the new entity i.e., the resulting assessee company consequent upon demerger and therefore, the A.O. had rightly treated it as capital expenditure." Brief facts necessary for adjudication are as follows: "2.1 The assessee company is engaged in the business of generation, transmission and distribution of electricity in the State of Gujarat. The erstwhile Gujarat Electricity Board in a process of restructuring was demerged into seven different companies. Gujarat Urja Vikas Limited ("GUVNL" for short) was assigned the function of bulk purchase and sale of power. The return of income filed by the respondent-assessee on 31st December 2006 for the A.Y. 2006-07 declared total income at Rs. Nil and the book profit was shown at Rs. 77,76,44,000/- and the same was revised later on 26th October 2007 on account of some error in computation and the same had been reduced to Rs. 72,68,26,004/-. 2.2. Such return was processed under Section 143(1) of the Income-tax Act, 1961 ("the Act" for short). However later, the same was scrutinized and in scrutiny assessment order under Section 143(3) of the Act came to be passed on 26th December 2008. The total income of the assessee was computed and so was the book profit under Section 115JB of the Act."
(2.) The Assessing Officer was of the opinion that an expenditure of Rs. 606.52 lacs claimed under "Legal & Professional Fees" pertained to reorganization of the business of erstwhile Gujarat Electricity Board by way of demerger and also included expenditure pertaining to issue of allotment of shares; expenditure pertaining to Internet Bandwidth, supply and installation of software, legal and professional fees in respect of restructuring, etc. These expenses according to the Assessing Officer were not the business expenditures, but, were capital in nature. Accordingly, the total amount of Rs. 606.52 lacs had been disallowed.
(3.) Aggrieved assessee preferred appeal before the Commissioner of Income-tax (Appeals). CIT(A) extensively dealt with the issue and held in favour of the assessee holding that Messrs. Crisil Limited and Feedback Ventures Limited were paid certain amounts for preparation, finalization and for filing of the annual revenue requirement (ARR), petitions before GERC, for preparation of short-term power purchase agreements and for formulating strategies for demand side management. Moreover, other expenses were neither covered nor could be categorized as capital in nature.;