2012 (9) TMI 914 - SC - Income Tax

Entitlement to deducted under Section 43-B - Held that - There is not dispute that the assessee has paid tax which was calculated on estimation under the Karnataka Sales Tax Act, 1957. In the circumstances, Section 43B of the Income Tax Act, 1961, squarely applies. - Decided in favour of assessee. Club membership fee for employees - disallowance u/s 37 - Held that - A series of judgements have been passed by High Courts holding that club membership fees for employees incurred by the assessee is business expense under Section 37 of the Income Tax Act, 1961. We also find that none of the decisions have been challenged in this Court. Even otherwise, we are of the view that it is a pure business expense.- Decided in favour of assessee.

Summary

Issues:
1. Application of Section 43B of the Income Tax Act, 1961 on tax paid under the Karnataka Sales Tax Act, 1957.
2. Deductibility of advance customs duty under Section 43B of the Income Tax Act, 1961.
3. Deductibility of club membership fee for employees under Section 37(1) of the Income Tax Act, 1961.

Analysis:
1. The first civil appeal involved the application of Section 43B of the Income Tax Act, 1961 on tax paid under the Karnataka Sales Tax Act, 1957. The Supreme Court noted that the assessee had paid tax calculated on estimation under the Sales Tax Act, making Section 43B applicable. The Court declined to interfere with the impugned judgment, resulting in the dismissal of the civil appeal by the Department.

2. The second civil appeal pertained to the deductibility of advance customs duty under Section 43B of the Income Tax Act, 1961 for the Assessment year 1995-96. Both the Income Tax Appellate Tribunal and the High Court found that there was no evidence of advance custom duty payment by the assessee, but confirmed payment of customs duty under the Customs Act, 1962. Consequently, the assessee was deemed entitled to Section 43B benefits. The Supreme Court upheld the lower authorities' decision, dismissing the civil appeal by the Department.

3. The third civil appeal raised two questions: the deductibility of advance customs duty and the club membership fee for employees under Sections 43B and 37(1) of the Income Tax Act, 1961, respectively. The Court referenced a previous judgment favoring the assessee regarding advance customs duty deduction. Regarding the club membership fee, the Court observed that High Courts had consistently held such fees as a business expense under Section 37, and these decisions were unchallenged. The Court concurred with the business expense classification and dismissed the civil appeal by the Department.

In conclusion, the Supreme Court's judgments across the three civil appeals affirmed the applicability of tax provisions and upheld lower authorities' decisions, resulting in the dismissal of the Department's appeals in each case.