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2020 (2) TMI 948 - AT - Income TaxDisallowance of entrance fees towards corporate membership of club - nature of expenditure - revenue or capital - HELD THAT - The purpose of the expenditure is to have a suitable platform for meeting people and getting advantages of meeting many people at a time to maintain old contacts and also to make new contacts. The main purpose of the organization is to induce its officers to attend such places for maintaining and making contacts for the benefit of business. Even if some personal advantage is obtained by officers, it will be in nature of maintaining good relations with officers and in nature of staff welfare expenses - the expenses are incurred wholly and exclusively for the purpose of business. By obtaining membership for a period of more than one year, there may be an advantage which is in the field of revenue benefit and not for obtaining any capital asset or obtaining benefit in capital field. Therefore, such expenses will be of revenue nature. For that assessee relied on the judgment of the Hon ble Delhi High Court in the case of CIT vs. Samtel Color Ltd. 2009 (1) TMI 26 - DELHI HIGH COURT wherein consider allowability of corporate membership fees of clubs as allowable business expenditure. We find merit in the submissions of the ld counsel and direct the AO to treat entrance fees paid to club as revenue expenditure. Disallowance u/s 40(a)(ia) for non-deposit of TDS - deduction and deposits before the due date of filing of return of income - HELD THAT - We note that the said TDS was paid before the filing of return of income u/s. 139(1) of the I.T. Act, therefore no addition should be made for that we rely on the judgement of VIRGIN CREATIONS 2011 (11) TMI 348 - CALCUTTA HIGH COURT wherein it was held that the said TDS should be allowed. Respectfully following the decision of jurisdictional High Court, we hold that since the assessee has deducted and deposited tax on contractual payments under consideration before the due date of filing of return of income, disallowance u/s 40(a)(ia) is not warranted, therefore, we delete the disallowance Disallowance u/s 14A r.w.r. 8D - HELD THAT - As relying on NICE BOMBAY TRANSPORT (P) LTD. VERSUS ACIT (OSD) , CIT (V) , NEW DELHI 2019 (4) TMI 42 - ITAT DELHI Application of Rule 8D to the facts of the case is not correct, hence, the addition on this account is hereby directed to be deleted.
Issues Involved:
1. General nature of the appeal. 2. Disallowance of entrance fees paid to the club. 3. Disallowance under section 40(a)(ia) for non-deposit of TDS. 4. Applicability of section 40(a)(ia) for amounts paid during the year. 5. Disallowance under section 14A. 6. Charging of interest under section 234D. Issue-wise Detailed Analysis: 1. General Nature of the Appeal: - The first ground raised by the assessee was general in nature and did not require adjudication. 2. Disallowance of Entrance Fees Paid to the Club: - The AO disallowed the entrance fees of ?551,500 paid to the club, treating it as a capital expenditure. - The CIT(A) confirmed this addition. - The Tribunal noted that the entrance fees paid for corporate membership provided an enduring benefit but argued that it should be treated as revenue expenditure, not capital expenditure. - The Tribunal relied on the judgment of the Hon'ble Delhi High Court in CIT vs. Samtel Color Ltd. to conclude that such expenses are incurred wholly and exclusively for business purposes and should be allowed as revenue expenditure. - The Tribunal directed the AO to treat the entrance fees as revenue expenditure. 3. Disallowance under Section 40(a)(ia) for Non-deposit of TDS: - The AO noticed that the assessee had not deposited TDS on payments amounting to ?16,85,08,240 within the due time and made an addition under section 40(a)(ia). - The CIT(A) confirmed this disallowance. - The Tribunal noted that the TDS was paid before the filing of the return of income under section 139(1). - Relying on the judgment of the Hon'ble Calcutta High Court in CIT vs. Virgin Creations, the Tribunal held that no addition should be made since the TDS was deposited before the due date of filing the return. - The Tribunal deleted the disallowance of ?16,85,08,240. 4. Applicability of Section 40(a)(ia) for Amounts Paid During the Year: - The Tribunal's decision on this issue was integrated with the previous issue, where it was concluded that the disallowance under section 40(a)(ia) was not warranted as the TDS was paid before the due date of filing the return. 5. Disallowance under Section 14A: - The AO disallowed ?1.58 crores under section 14A, invoking Rule 8D(2)(iii), even though the shares were held as stock-in-trade. - The CIT(A) confirmed this disallowance. - The Tribunal referred to the order of the Division Bench of Delhi Tribunal in Nice Bombay Transport (P) Ltd., where it was held that Rule 8D should not apply to shares held as stock-in-trade. - The Tribunal also considered the judgment of the Hon'ble Supreme Court in Maxopp Investment Ltd vs. CIT, which distinguished between shares held as stock-in-trade and shares held for retaining control over a company. - The Tribunal concluded that the disallowance under section 14A was not warranted for shares held as stock-in-trade and deleted the addition of ?1.58 crores. 6. Charging of Interest under Section 234D: - The issue of charging interest under section 234D was not specifically adjudicated in detail by the Tribunal in the provided text. Conclusion: - The Tribunal allowed the appeal of the assessee, directing the AO to treat the entrance fees as revenue expenditure, deleting the disallowance under section 40(a)(ia) for non-deposit of TDS, and deleting the disallowance under section 14A for shares held as stock-in-trade. Order Pronounced: - The order was pronounced in the Court on 19.02.2020.
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