Mumbai ITAT allows
deduction for professional fees / merchant banking fees paid to PwC and other
financial advisors for conducting financial and legal due diligence during AY
2008-09, observes that the very purpose of the expenditure was to raise funds to
meet working capital requirements; Rejects Revenue’s stand that since the funds
were raised through issue of rights shares, the payment incurred in connection
therewith was capital in nature being incurred for the purpose of raising
equity; Observes that the expenditure was incurred to get the due diligence
conducted since assessee was embarking on a major expansion plan, also observes
that increasing number of sales orders resulted in increased working capital
requirements; Acknowledges that availing of the said professional services to
get the relevant reports for presentation to bankers was a prerequisite for the
major fund raising exercise; Since the expenditure was incurred to raise funds
to meet working capital requirements, which is an integral part of any business
activity, ITAT holds the expenditure as revenue in nature.:ITAT
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