9911796707
TMI Blog2013 (8) TMI 837X X X X Extracts X X X X X X X X Extracts X X X X ..... wholly and exclusively for the purposes of business and the expenditure should not be towards capital account - In the instant case, the admission fee paid towards corporate membership is an expenditure incurred wholly and exclusively for the purposes of business and not towards capital account as it only facilitates smooth and efficient running of a business enterprise and does not add to the profitearning apparatus of a business enterprise. Expenditure made as donation for religious purposes – On souvenirs /booklets assessee name appeared on the religious occasion – Expenditure as advertisement expenditure – Held that:- These so called souvenirs/booklets are not the publication of any institution, industrial organisation or other association or institutions as permanent in nature and related to the business of the assessee. Accordingly, no merit in the assessee’s contention that the expenditure incurred for advertisement in souvenirs of all these parties is an allowable expenditure – Decided against the Assessee. - ITA No.1740/Mum/2012 - - - Dated:- 24-7-2013 - Sanjay Arora And Vijay Pal Rao, JJ. For the Appellant : Shri Deepak H Padachh For the Respondent : Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee and held that it is nonrecurring expenditure and has resulted in an enduring benefit to the assessee. Accordingly the AO disallowed the entrance fee for club membership fees amounting to Rs. 22,60,504/- as capital expenditure. On appeal, the CIT(A) has confirmed the disallowance made by the AO. 4. Before us the Ld. Counsel for the assessee has submitted that the expenditure has been incurred to build up better contacts with the clients and customers and thereby to improve business prospects. The club has been used by the assessee for conference and meetings with clients, suppliers business associates etc. Therefore the club provided the directors the place meeting and entertaining clients, suppliers business associates etc. which is in the business interests of the assessee. The assessee has not acquired any asset by making the payment of entrance fee of club. The expenditure is in the nature of an advantage of commercial sense and has been incurred for running the business of the assessee more profitable, therefore, it cannot be treated as capital in nature. He has relied upon the following decisions: - Dy. CIT vs. Bank of America Securities (India) P. Ltd. [2011] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Appellate Assistant Commissioner which were clear on the point have not been disturbed by the Tribunal. The Appellate Assistant Commissioner categorically found that the payments of club fees were made with a view to enable the assessee to improve its business relations and prospects. The Tribunal, without recording a contrary finding on this crucial aspect of the matter, restored the order of the Income-tax Officer. In our judgment, considering clear finding given by the Appellate Assistant Commissioner, without contrary finding thereto by the Tribunal, we must accept the facts as found by the Appellate Assistant Commissioner. Consequently, the payments must be allowed as business expenditure not falling within mischief of section 40(a)(v). The house rent payment being a cash amount paid would be covered by the ratio of the decision in Indokem [1981] 132 ITR 125 (Born). We, therefore, answer question No. 2 in the negative and in favour of the assessee. 7. A similar view has been taken by the Hon ble Delhi High Court in the recent decision in the case of CIT Vs Samtel Color Ltd. (supra) as under: 10. Having heard learned counsel for the Revenue as well as the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lopment Corporation Ltd. v. CIT [1997] 225 ITR 792. The judgment of the Supreme Court on which the Kerala High Court has relied heavily dealt with the issue with regard to the fee paid to the Registrar of Companies for increase of authorised capital, that is, whether such an expense was in the nature of revenue or capital expenditure. The Supreme Court came to the conclusion that since the fee was paid to the Registrar of Companies for increase in the capital base of the assessee it was in the nature of capital expenditure. According to us, the ratio of the aforementioned Supreme Court judgment is not applicable to the expenses incurred on an admission fee for corporate membership. We respectfully disagree with the ratio of the judgment of the Kerala High Court. In turn, we respectfully follow the ratio of the judgment of the Division Bench of this court in CIT v. Nestle India Ltd. [2008] 296 ITR 682 and that of the Bombay High Court in the case of Otis Elevator Co. (India) Ltd. v. CIT [1992] 195 ITR 682. 8. The Hon ble Delhi High Court has considered all the relevant decision on the point and then decided the issue in favour of the assessee. Following the decision of Hon ble Ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... social purposes but were claimed as advertisement expenses. The AO further noted that out of the said expenses Rs. 10,000/- was paid to Maharashtra Navnirman Sena which cannot be said to be donation for business purposes. Accordingly the AO disallow the said amount of Rs. 81,750/-. On appeal, the CIT(A) has confirmed the disallowance to the extent of Rs. 71,750/- by taking note of the facts that the assessee itself as suo-motto disallowed a sum of Rs. 10,000/- in computation of income. 13. Before us the Ld. AR of the assessee has submitted that the AO disallowed these expenses by treating the same as religious donation whereas these expenses were incurred by the assessee on advertisement and not as donation. The Ld. AR has submitted that these expenses were incurred for advertisement through banners, souvenirs, booklets etc. and therefore cannot be considered as donation. He has relied upon the CBDT Circular No.200 dated 28.06.1976 and CBDT Circular No. 203 dated 16.07.1976 as well as decision of Hon ble Calcutta High Court in case of British Electrical Pumps (P) Ltd. Vs CIT 106 ITR 620. 14. On the other hand, the Ld. DR has relied upon the order of the authorities below and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation/functions in which the assessee name may be appeared in the booklets and souvenirs issued on those occasions. Thus these so called souvenirs/booklets are not the publication of any institution, industrial organisation or other association or institutions as permanent in nature and related to the business of the assessee. Accordingly, we do not find any merit in the assessee s contention that the expenditure incurred for advertisement in souvenirs of all these parties is an allowable expenditure. The decision relied upon by the assessee are not applicable in the facts of the assessee s case, therefore we do not find any reason to interfere with the orders of the authorities below qua this issue. 17. Ground No. 4 is regarding levy of interest u/s 234B and 234C. The interest u/s 234B and 234C are consequential in nature therefore, no specific findings is required. 18. Ground No. 5 is regarding initiation of penalty proceedings u/s 271(1)(c). This ground of the assessee is pre-mature as it is against the initiation of penalty proceedings. Therefore prior to levy of penalty it cannot be challenged in appeal accordingly dismissed. 19. In the result, the appeal of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
