2011 (8) TMI 1368 - HC - Income Tax

Summary

Issues involved:
1. Allowability of Otters Club membership fee as business expenditure u/s 37(1) of the IT Act.
2. Entitlement to higher rate of depreciation on a vehicle registered as a personal vehicle under the Motor Vehicles Act, 1988.

Issue 1: Otters Club Membership Fee
The appellant, an actor, claimed Rs.15,00,000 as entrance fee to Otters Club as revenue expenditure for professional purposes. The assessing officer disallowed the claim stating it could be used for personal purposes. The C.I.T.(A) upheld the disallowance. However, the I.T.A.T. allowed the claim, noting the actor had memberships in two clubs for professional and personal use. Citing the OTIS Elevators Ltd. v. C.I.T. case, the I.T.A.T. held the expenditure for professional purposes was valid, thus dismissing the first question raised by the Revenue.

Issue 2: Higher Depreciation on BMW Car
The appellant claimed 50% depreciation on a BMW car, but the assessing officer allowed only 20%. The I.T.A.T. allowed the higher rate under rule III(2)(iid) of the Income Tax Rules, 1962. The Revenue argued the vehicle was not a commercial vehicle, hence not eligible for 50% depreciation. However, as per note-3A of Appendix-I, a "commercial vehicle" includes a light motor vehicle with an unladen weight not exceeding 7,500 kgs. Since the appellant met all conditions, the I.T.A.T.'s decision to allow 50% depreciation on the BMW car was upheld.

In conclusion, the High Court of Bombay dismissed the appeal, finding no merit in the Revenue's contentions on both issues.