Amalgamation expenses are allowable deduction

The Gujarat High Court in CIT v. Akme Electronics & Control (P.) Ltd. (2004) 137TAX263 allowed deduction of legal expenses incurred by the transferor company for the purpose of amalgamation on the ground that the liability to pay such expenses arose in respect of the period when it still continued to exist no matter that the effective date of amalgamation may be prior to the date of sanction of the scheme by the High Court. Like in every case since the amalgamation is resorted to for the smooth and efficient conduct of the business of the transferee company the High Court held that the legal expenses were laid down wholly and exclusively for the purpose of the business of the assessee company.