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TMI Blog2018 (3) TMI 1172X X X X Extracts X X X X X X X X Extracts X X X X ..... benefit and not for obtaining any capital asset or obtaining benefit in capital field. Therefore such expenses will be of revenue nature. - Decided in favour of assessee. - ITA No.1044/Kol/2016 - - - Dated:- 14-2-2018 - Shri N. V. Vasudevan, Judicial Member And Shri Waseem Ahmed, Accountant Member For the Appellant : Shri S.K. Tulsiyan For the Respondent : Shri Arindam Bhattacherjee, Addl. CIT-DR ORDER PER Waseem Ahmed, Accountant Member:- This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-2, Kolkata dated 27.04.2016. Assessment was framed by DCIT, Circle-4 Kolkata u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) vide his order dated 02.12.2010 for assessment year 2008-09. Shri S.K. Tulsiyan, Ld. Advocate appeared on behalf of assessee and Shri Arindam Bhattacherjee, Ld. Departmental Representative appeared on behalf of Revenue. 2. The assessee has raised the following grounds:- 1. That the learned CIT(A) erred in confirming addition of advertisement expense of ₹ 6,09,402/ made by the AO, not appreciating the fact that the said expense incurred in publishin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugust 2008. He was conferred the award of Officer de I Ordre national de merite by Jacques Chirac, President of France for his pivotal role as Honorary Consul of France in Kolkata, in promoting Trade and Culture between France and India. The said award was awarded to him by Dominique Girard, Ambassador de France en Inde, French Embassy in India in a special ceremony held in Kolkata on 21.06.2007. Since the award was of a great honour for the assessee-company also, it was decided to publish the same in the daily newspaper so as to disseminate the information about the award among the general public. The said advertisement is akin to sales promotion expenses of the assessee-company in as much the general public was made aware of the high influential position and achievements of the M.D of the company and as such is allowable u/s. 37(1) of the Act. It is an accepted fact that the Chairman-cum-MD of the assessee-company holds a pivotal position in the assessee-company and is in-charge of all the major decisions of the assessee-company. The expense incurred in publishing the achievement of the MD of the assessee-company in the newspapers has added to the brand value of the assessee-comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the top industrialists of India were present. Even if the assessee has not procured orders overseas, this award has added to the brand value of the assessee-company and increased the revenue from operations in the domestic market. Further, Mr. Mahendra Kumar Jalan was one of the members sitting on the dais and representing the country in the Annual French National Day Celebration held on 14.07.2007 in Kolkata and addressed his speech to the top industrialists in India and Embassy of France. In view of the above, it is humbly requested before your honour to delete the disallowance of ₹6,09.402/- incurred in relation to advertisement expenses. However, Ld. CIT(A) disregarded the contention of assessee and confirmed the order of AO by observing as under:- I have considered the submissions of thee AR of the appellant. The AO has mentioned the assessee has got no export to France nor any business connection. The AR has also not proved any business connection with these expenses debited to profit and loss account during the appellate proceeding. Hence, the addition as made by the AO is confirmed. Aggrieved by this, the assessee has come up in appeal before us. 6. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the MD is going to increase the image of the assessee-company at national /international level in the area of the business connections. In rejoinder Ld. DR has not brought anything on record suggesting that the MD of the assessee-company was associated with any other activity or group of companies. It is well settled law that the expenditures incurred by the assessee exclusively for the purpose of business are allowed as deduction u/s. 37(1) of the Act. In our view, the reason given by the AO that the no business activity was carried on by the assessee with France is not tenable in view of the fact that allowability of the expenditure does not depend upon the outcome of the expenditure. Rather, the expenditures are incurred by the business enterprise for the growth of the business and it is not necessary that all the expenditures would entail positive result to the company. In the instant case, the expenditure has been incurred and claimed by the assessee under the head advertisement which has not been disputed by the Revenue. The meaning of the award advertisement has been defined by the Hon'ble jurisdictional High Court in the case of Sarda Plywood Industr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,555 However, the AO observed that this club expenses have been incurred by the Director and Senior Executives of the assessee-company which are personal in nature. As such, there is no connection between the expenses incurred by the Director and Sr. Executives of the assessee-company with the business of assessee. Thus, AO disallowed the expenses of ₹4,12,555/- and added to the total income of assessee. 10. Aggrieved, assessee preferred an appeal before Ld. CIT(A). The assessee before ld. CIT-A submitted that the purpose for taking Corporate Membership of the club is to increase business relation through the Director and top Executives of the assessee-company. As such, various business meetings / seminars are held in the club premises with prospective buyers. Therefore, same expenses were incurred exclusively for the purpose of promotion of assessee s business. However, Ld. CIT(A) after considering the contention of assessee allowed relief in part to assessee by observing as under:- I have considered the submissions of the AR of the appellant. The expenses of ₹ 3.60 lacs are relating to Indian Chamber of Commerce (ICC) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in nature of entrance fees, annual fees, life membership fees and reimbursement of actual expenses etc. 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. Therefore, 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 of enduring nature. However, such advantage 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. In this regard we find support guidance from the judgment of Hon ble Punjab Haryana High Court in the case of CIT Vs. Groz Beckert Asia Limited reported in 351 ITR 196 wherein it was held as unde ..... X X X X Extracts X X X X X X X X Extracts X X X X
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