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TMI Blog1999 (4) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be viewed as an 'entertainment expenditure' and, therefore the disallowance made in this regard was not called for ? 2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the expenditure incurred on the maintenance of the vehicles owned by the company including the wear and tear thereon, which were provided by the company to its directors should not be treated as a 'perquisite' for the purpose of disallowance under section 40A(5) of the Income-tax Act, 1961, and, therefore, the disallowance of the sum of Rs. 10,317 should be deleted ? 3. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the subscriptions paid by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Finance Act, 1983, with effect from April 1, 1976. Since the assessment year involved is 1974-75, the prior law would apply and following the said decision of the Supreme Court, we answer the first question of law in the affirmative and against the Revenue. The second question relates to the applicability of section 40A(5) of the Act with reference to the disallowance of Rs. 10,317 being the expenditure incurred by the assessee on the maintenance of vehicles owned by it and provided to its directors. The question that arises is whether the maintenance expenditure can be regarded as perquisite. A similar question was considered by the Supreme Court is C. W. S. (India) Ltd. v. CIT [1994] 208 ITR 649, and the apex court held that the mainte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chinery awaiting installation and the value of the building under construction should be taken into account as a part of the capital employed in the undertaking. Following the decision of the Supreme Court, the Tribunal was correct in holding that while arriving at the capital employed under section 80J of the Act, the value of the machinery installed and the value of the building under construction should be taken into account. Accordingly, we answer the fifth question of law in the affirmative and against the Revenue. The third question relates to the claim of the assessee of the deduction on the subscription amounts paid to Rotary Club, Gymkhana Club and Mylapore Club as business expenditure. The Income-tax Officer disallowed the claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness relationship. The object of the assessee was that its directors by remaining as members in some of the city clubs would give them certain social status, and it is obvious that by being members of the club, they would be able to meet various kinds of people in a calm and cool atmosphere of the club and because of the meeting they would develop business relationship, benefiting the assessee. Therefore, it cannot be said that the possible advantage to the assessee is remote and far fetched. No doubt, there may be a personal benefit enjoyed by the director by the various types, of amenities afforded at the club. But the personal benefit that goes to the director is incidental to the membership of the club. The question whether a particula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Gujarat and Bombay High Courts make it clear that a club's subscription is an allowable expenditure as the object in mind. In our view, if the entrance fee paid to become a member is allowable, the subscription paid by the assessee will also stand on the same footing and it is also allowable as a business expenditure. The decision of the apex court in the case of Sri Venkata Satyanarayana Rice Mills Contractors Co. v. CIT [1997] 223 ITR 101 relied upon by learned counsel for the assessee, wherein the apex court held that the contribution made to a public welfare fund was an allowable expenditure is not quite applicable to the facts of this case and hence it is not necessary to deal with the decision of the Supreme Court. We do not agr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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