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TMI Blog2020 (11) TMI 737X X X X Extracts X X X X X X X X Extracts X X X X ..... 798/Chd/2019 - - - Dated:- 23-9-2020 - Shri. N.K. Saini, VP And Shri, Sanjay Garg, JM For the Assessee : Shri Sudhir Sehgal, Advocate For the Revenue : Shri Arvind Sudarshan, JCIT ORDER PER N.K. SAINI, VICE PRESIDENT This is an appeal by the Assessee against the order dt. 19/03/2019 of the Ld. CIT(A), Panchkula. 2. Following grounds have been raised in this appeal: 1. That the Ld. Commissioner of Income Tax (Appeals)-4, Panchkula has erred in upholding the disallowance of ₹ 1,67,060/- incurred by the appellant for club services and facilities used for entertaining the customers and to promote the business interests of the company as per para 6.2 of his order. 2. That addition of ₹ 1,67,06 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble under section 37(1) of the Act. The A.O. confronted the assessee on this issue, in compliance, it was stated that those expenses were incurred for entertaining the guest of the assessee company to promote the business interest. However the A.O. did not accept the explanation of the assessee and made the disallowance of ₹ 1,67,060/-. 6. Being aggrieved the assessee carried the matter to the Ld. CIT(A) and submitted as under: While framing the assessment order Ld. AO in para 4 of the order has mentioned that company has debited expenses of ₹ 1,67.060/- under the head Club Fee Subscription on account of club services facilities used. These expenses are of personal nature and not allowable expenses under section 37(i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ersonal use of company's facilities by directors was held to be an allowable expenditure. The fact of the expenses has been properly explained to Ld. AO, As such addition made by AO is completely based on conjectures and surmises and need to be deleted. 7. After considering the submissions of the assessee the Ld. CIT(A) observed that those expenses had been incurred on account of club service facility used. She further observed that the expenses had been claimed under section 37(1) of the Act which provide for expenses which had been incurred wholly and exclusively for the purposes of business of the assessee. She also observed that the assessee had claimed that those expenses were incurred for business promotion of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... detail of the expenditure of club services during the year under consideration and submitted that all the expenses were related to the subscription for club membership fee. Reliance was placed on the following case laws: Deputy Commissioner of Income Tax V/s Deloitte Touche Tohmatsu ITA NO.3017/MUM/2016 MUM-TRIB order dt. 27/04/2018 Commissioner of Income Tax V/s Nestle India Ltd. 296ITR682 (DEL) Commissioner of Income Tax V/s Samtel Color Ltd. 180 taxmann.com 82 (DEL) Commissioner of Income Tax V/s Sundaram Industries Ltd. 240ITR335 (MAD) Commissioner of Income Tax V/s United Glass Mfg. Co. Ltd reported in 28 taxmann.com 429 (SC) 10. In his rival submissions the Ld. DR strongly supported the orders of the autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e business of the assessee company, the disallowance made is deleted. Reliance is placed on the case ITAT Mumbai DCIT Vs. M/s Deloitte Touche Tohmatsu, ITA No. 3017/Mum/2016 dated 27/04/2018 wherein it was held that expenditure incurred towards club and hotel membership fee is an allowable expenses u/s 37(1) of the Income Tax Act, 1961. In view of the above this ground of appeal is allowed. 11.2 On an identical issue the Hon'ble Madras high Court in the case of CIT Vs. Sundaram Industries Ltd. (supra) held as under: Section 37 postulates that any expenditure laid out or expended wholly and exclusively for the purpose of the business or profession shall be allowed in computing the income of the assessee. The essential requ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person expending the same and the object with which he incurred the expenditure. The assessee had not spent the money with the object of providing a personal relaxation to the director, but it was incurred to promote its business. In the commercial world, the contact with the right person is vital for an efficient business organisation. The expenditure incurred could not be regarded as having been incurred for the personal benefit of the director. In each case, it has to be seen whether the object of the expenditure was to promote the business of the assessee. In view of the finding by the Tribunal, the assessee-company had incurred the expenditure wholly and exclusively for the purpose of its business and therefore the expenditure inc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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