ITAT : Due diligence fee for raising equity to meet working-capital requirement, revenue expenditure

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