9911796707
TMI Blog2010 (9) TMI 1084X X X X Extracts X X X X X X X X Extracts X X X X ..... in existing business relationships and promote business. The assessee while reiterating that the expenditure has been incurred wholly and exclusively for the purpose of business submitted that the same is allowable as revenue expenditure. The Assessing Officer did not find the explanation acceptable. He observed that in the case of club membership after payment of entrance fee and getting the membership registered the assessee member does not get continuous free facility but has to make revenue payments and every occasion when the membership is used. The fact is that membership of a club entails payment of entrance fee and subsequent obligations to give away further expenditure on use of the privilege. Further, the use of the facility itself is based on the condition that the member gets registered as a member which amounts to acquiring a privilege or advantage of enduring nature. The Assessing Officer was of the view that the expenditure has to be held on capital account or without prejudice, as deferred revenue expenditure, rejected the assessee's contention and disallowed Rs. 16.00 lacs as capital out lay and added to the income of the assessee. 3. On appeal before the ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Gujarat State Export Corpn. Ltd. vs. CIT 209 ITR 649 (Guj.) deleted the addition of Rs. 16.00 lacs made by the Assessing Officer being entrance fee to Bombay Gymkhana Club and allowed the appeal. 4. Being aggrieved by the order of the ld. CIT(A) the revenue is in appeal before us taking following grounds of appeal :- "1. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in deleting disallowance of expenditure of Rs. 16,00,000/- in respect of club membership fees without appreciating the fact that the payment is capital in nature. 2. The appellant prays that the order of the CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored." 5. At the time of hearing the ld. DR submits that the ld. CIT(A) while deleting the addition of Rs. 16.00 lacs has relied on the decision of Otis Elevator Co. (India) Ltd. vs. CIT (1992) 195 ITR 682(Bom.) and Gujarat State Export Corporation Ltd. vs. CIT (1994) 209 ITR 649(Guj). In the case of Otis Elevator Co. (India) Ltd. the relevant question No.2 before the Hon'ble High Court was "whether, on the facts and in the circumstances of the case the Tribunal was right in holding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal in the assessee's own case in DCIT vs. M/s. Bank of America Securities (India ) Pvt. Ltd. in ITA No.7068/M/2008 order dated 30.11.2009 for the Assessment Year 2005-06 is not applicable. He therefore, submits that the addition of club membership fees of Rs. 16.00 lacs made by the Assessing Officer be restored. 6. On the other hand the ld. Counsel for the assessee while strongly relying on the decision of the Tribunal in the assessee's own case in DCIT vs. M/s. Bank of America Securities (India ) Pvt. Ltd. (supra), submits that the facts are identical and the Tribunal after considering the decision in Framatone Connector OEN Ltd. relied on by the ld. DR has decided the issue in favour of the assessee . She further submits that the Hon'ble Jurisdictional High Court in Otis Elevator Co. (India) Ltd. supra, have held that the payments must be allowed as business expenditure not falling within the mischief of s.40(a)(v). Therefore, the plea taken by the ld. DR that the said decision was rendered with regard to the provision of sec.40(a)(v) is devoid of any merit. She further submits that recently the Hon'ble Delhi High Court in CIT vs. Samtel Color Ltd. (2009) 180 T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Gujarat State Corpn. Ltd. supra, and it has been held that the expenditure incurred in payment of entrance fee for becoming member of sports club is in the nature of an advantage in the commercial sense but not an advantage in the capital field, therefore, revenue expenditure. 9. In Otis Elevator Co. (India) Ltd. (supra), Their Lordships have held as under : "In our judgment considering the clear finding given by the AAC, without a contrary finding thereto by the Tribunal, we must accept the facts as found by the AAC. Consequently, the payments must be allowed as business expenditure not falling within the mischief of s.40(a)(v)". 10. In Samtel Colour Ltd. supra, Their Lordships after considering the various decisions including the decision in Framatone Connector OEN Ltd. supra, relied on by the ld. DR have observed and held as under: "5.3 To support the revenue's contention that the impugned expenditure is on capital account the ld. Counsel, Ms. Prem Lata Bansal has cited the judgment of the Framatone Connector OEN Ltd. vs. Dy. CIT (2006) 205 CTR (Ker.) 250: (2006) 157 Taxman 116 (Ker.). The said judgment is based on the Supreme Court judgment in the case of Punjab State Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conduct of the business and therefore the expenditure will be of the nature of revenue expenditure. This view is also supported by the judgment of Hon'ble High Court of Gujarat in case of Gujarat State Export Corporation Ltd. (209 ITR 649) in which the lumpsum entrance fees paid towards membership of the club has been held to be allowable as revenue expenditure. Though the Hon'ble High Court of Kerala in case of Connector Oven Ltd. (294 ITR 559) have taken a different view, we have to follow the view taken by Hon'ble High Court of Gujarat which is favourable to the assessee in view of the judgment of Hon'ble Supreme Court in case of Vegetable Products (88 ITR 192). We therefore see no infirmity in the order of CIT(A) and the same is upheld." 12. In National Textile Corporation Ltd. (M.P.) vs. CIT (2008) 216 CTR (MP) 153 it has been held as under: "Tribunal has to follow the decision of the Jurisdictional High Court without making any comment upon the said decision; it is not permissible for the Tribunal to sidetrack and/or ignore the decision of the Jurisdictional High Court on the ground that it did not take into consideration a particular provision of law." 13. Respectf ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
