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TMI Blog2024 (6) TMI 596X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purpose of business. 3. That on the facts and circumstances of the case and in law, the Ld. CIT Appeal erred in sustaining the impugned assessment order U/s 143(3) for AY 2017-18." 3. Facts giving rise to the present appeal are that the assessee filed its return of income on 30.10.2017, declaring total income at loss of INR 6,21,94,083/-. The case was selected for limited scrutiny through Computer Aided Scrutiny Selection ("CASS") assessment and the assessment u/s 143(3) of the Income Tax Act, 1961 ("the Act") was framed vide order dated 01.12.2019. Thereby, the Assessing Officer ("AO") disallowed business expenses in respect of club expenditure and fee and subscription of INR 3,26,214/- on the ground that such expense cannot be treated for having incurred wholly and exclusively for business purposes, as same being personal in nature. 4. Aggrieved against this, the assessee preferred appeal before Ld.CIT(A), who after considering the submissions, sustained the impugned addition and dismissed the appeal of the assessee. 5. Aggrieved against the order of Ld.CIT(A), the assessee is in appeal before this Tribunal. 6. Apropos to the grounds of appeal, Ld. Counsel for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ful disallowance of Rs. 3,26,214/- and the AO. Completely erred on facts and in law in making addition on account of disallowance of club expenses of Rs. 3,26,214/-. That the Ld. AO. also erred on facts and in law in not appreciating the fact that the club expenses are incurred for the purpose of business". (iii). I have carefully considered the submissions of the appellant and also the grounds of appeal raised by the appellant. The issue is whether the club expenses incurred by the appellant is allowable in terms of section 37 of the Act. Section 37 envisages that: 37. (1) Any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head "Profits and gains of business or profession". Expenditure should be incurred wholly or exclusively for Business or Profession - The main prerequisite for claiming deduction under the provision of Section 37 is that expenditure should be wholly and exclusively for business or prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income of the assessee. On the basis of the ratio of the Supreme Court judgment in the case of CIT v. Durga Prasad More [1971] 82 ITR 540, it has to be held that the documents to which a reference has been made by the Id. Counsel for the assessee are self-serving devices and brought in aid to support an action which is neither justified on facts nor in law. It is the duty of the AO to go behind the smoke screen and find out the truth of the matter and it is a well-settled law for which authority, if any, may be found in the case of Swadeshi Cotton Mills Co. Ltd. v. CIT [1967] 63 ITR 57 (SC). Mere existence of an agreement would not make either the payment genuine or eligible for deduction as having been made for commercial expediency. Reliance for this was placed on the judgment of the Supreme Court in the case of Lachminarayan Madan Lal v. CIT [1972] 86 ITR 489. In fact it has to be stated that all these documents, viz., schedules of the balance sheet, are self serving devices in furtherance of the cause of the assessee and it cannot be relied upon in view of the judgment of the Supreme Court in the case of Durga Prasad More (supra). Suffice to state the word 'wholly' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntertaining customers by assessee - Held, yes [Paras 5 and 6] [In favour of revenue". (C). Yet, in another case reported in (2014) 52 taxmann.com 325 (Bombay)/[2015] 228 Taxman 357 (Bombay), in the case of Schindler India (P.) Ltd. v. Joint Commissioner of Income-tax, in IT APPEAL NO. 159 OF 2012, DATED: MARCH 21, 2014, the issue before the Hon'ble High Court of Bombay was: "IT: Expenditure incurred by assessee for creating manufacturing facility of elevator in India being in nature of capital expenditure, assessee's claim for deduction in respect of same under section 37 (1) could not be allowed. IT-II: Club subscription paid by assessee on behalf of its managing director being in nature of personal expenditure, could not be allowed as deduction". The Hon'ble High Court has held: "I. Section 37(1) of the Income-tax Act, 1961 Business expenditure - Allowability of (Machinery) - Assessee was importing components from abroad for making of elevator - Subsequently, due to change in policy, expenses were incurred for creating manufacturing facility in India - Assessee's claim for deduction of said expenses was rejected Whether since expenditure incurred by assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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