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TMI Blog2016 (1) TMI 1488X X X X Extracts X X X X X X X X Extracts X X X X ..... on behalf of director - HELD THAT:- Apropos meager amount incurred on club membership fee is allowable in view of various ITAT judgments including Sony India [ 2005 (5) TMI 557 - ITAT DELHI] . As a result this ground of the assessee is allowed. Disallowance of professional charges paid to consultant for preparing project report to set up new power plant which did not materialize - HELD THAT:- As it is not disputed that the opportunity of allotment of a coal mine along with establishment of 600 MW Coal based Power Plant in Raigarh District, Chhattisgarh was offered to assessee. Neither the genuineness of expenditure nor the shelving of the power plant project due to non allotment of coal block is doubted by authorities below. The expenditure has been disallowed only by holding it to be capital in nature. As in the case of CIT v. Expanded Metal Mfrs [ 1991 (2) TMI 99 - ALLAHABAD HIGH COURT] held that - Where assessee firm, carrying on business of expenditure of iron metal by mechanical process and its supply, started a new business of manufacture of rubber products and for that purpose raised loan interest was allowable for relevant period even though during that period asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d)], Jt. CIT v/s. Pankaj Oxygen Ltd. [(2003) 78 TTJ (Nag) 119], I.C.B. Ltd. v/s. I.T.O. [(2005) 93 ITD 418 (Mum)], Vijay Seeds Co. (P) Ltd. v/s. Asstt. CIT [(2001) 79 ITD 233 (Pune)] In all these cases expenditure incurred in Puja, Hawan, Kirtan and labour welfare was allowed as business expenditure, therefore, the above expenditures is allowable as business expenditure. - Compensation of removing unauthorized encroachment of Taparies 3.1 Assessee is engaged in the business of mining of Kota stone since 1945, having a huge mining area of 9.991 Sq.Km. allotted by The Mines Geology Department, Government of Rajasthan. The mining leases comprise of own purchase land, government land, Charagah land, agriculture land, wells, along with encroached, authorized and unauthorized houses, taparies etc. Every year a certain area is opened for mining which requires removal of such unauthorized encroachment as a business necessity. Like earlier years, assessee in this year paid Rs.210000/- Rs.310000/- on 12.01.2008, to Mr. Ram Narain S/o Moolchand Koli and Mr. Birdhi Chand S/o Ram Narain, towards compensation for vacating unauthorized Kacchi Taparies situated in our min ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cant possession of a building was not capital expenditure but was incurred wholly and exclusively in the course of business and allowable as such. 6. [(1978) 114 ITR 434 (Cal)] CIT v/s Deluxe Film Distributors Ltd. - Held - Amount paid for clearing title in the course of carrying on of business is for commercial expediency and therefore, allowable. - Membership of Rotary Club 4.1 Assessee incurred Rs.3000/- under the head of subscription towards the membership of director Shri Deepak Jatia for Rotary Club, Kota, as per the terms of appointment of Shri Deepak Jatia, as per resolution approved by AGM he is entitled for membership of two clubs on behalf of the company. These types of expenditures are essential for meeting with expected/existing customers, delegates, dignities for enhancement of the business, and used exclusively for business purpose and allowed as revenue expenditure. Ld. AO erred in disallowing club membership fee as not for purpose of business. 4.2 Reliance is placed on the judgments - Jt. CIT v/s. Sony India (P) Ltd. - [(2005) 4 SOT 30 (Del), Gujarat Petrosynthese Ltd. v/s. Dy. CIT [(2001) 76 ITD 257 (Ahd), Infosys Technologies Ltd. v/s. Jt. CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mencing new project then such expenditure will be treated as pre-operative expenditure, however if any project is not commenced it is to be allowed as revenue expenditure. In the given facts and circumstances, which are not disputed the legal and professional expenses incurred for exploring new business intrinsically linked to mining is to be allowed as revenue expenditure. Ld. Assessing Officer erred in disallowing these professional charges assuming to be capital in nature. 5.2 Reliance is placed on the following judgments: - 1. CIT v. Expanded Metal Mfrs. - [(1991) 189 ITR 317 (All)] - Held - Where assessee - firm, carrying on business of expenditure of iron metal by mechanical process and its supply, started a new business of manufacture of rubber products and for that purpose raised loan interest was allowable for relevant period even though during that period assessee's rubber factory did not work. 2. (1997) 226 ITR 253 (MP)] - CIT v/s. Malwa Vanaspati Chemicals Co. Ltd - Held - Where assessee - company in manufacture, processing and sale of vegetables, oil set up a new unit of manufacture of a kind acid and tribunal held that assessee's business activity r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in view of above factual and legal contentions, judicial precedent all the above expenditure being revenue in nature and incurred wholly and exclusively for business purpose shall be allowed to assessee. 6.1 Ld. DR supported the order of lower authorities. 7.1 We have heard the rival contentions and perused the material available on record. 1. Apropos Poojan expenses, we find merit in the contentions of assessee, these expenditure being in the field of customary expenses, labour welfare having been allowed in past year should be allowed. Our view is fortified by Honble Delhi High Court and Madras High Court judgments in the cases of Mohan Meakin Ltd and Aruna Sugars respectively (supra). 2. Apropos in the given facts and circumstances, expenditure amounting to Rs. 5,20,000/- on compensation and payment to facilitators for removal of encroachment to ensure smooth mining activities related to business of the assessee are to be held as allowable expenditure. Our view is fortified by Hon ble Supreme Court judgments in the case of Dalmia Jain and Co. and Empire Jute Co (supra) and other judgments. This ground of the assessee is allowed. 3. Apropos meager amount of Rs. 30 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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