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2017 (3) TMI 480 - AT - Income TaxExpenditure incurred for re- possession of the club - capital or revenue in nature or is an allowable expenses for determining real income - said expenditure though paid by the assessee for an amount already spent by the SP for earlier years after taking the loan from the bank - Held that:- The undisputed facts are that as per the joint development agreement the ownership of the assets of the club to be developed by the assessee was belonging to the assessee and the purchasers of the plots were not having any right in those assets. In the same, this is also provided that purchasers of the plots are to be admitted as members of the club subject to payment of necessary admission fees and other fees. This is also provided in the agreement that other persons can also be admitted as member of the club on payment of donations, entry fees and other fees. This is also agreed position of facts that the club was built by SP and the assessee was sharing revenue with SP. From these facts, it comes out that the providing of club facility and running of club is a doing of business in the present case because the assets of the club is property of the assessee and any accretion in the value of asset will be a gain to the assessee. Similarly, the club can charge admission fees and other fees without any cap and it will result in to income which was initially shared between the assessee and SP and after 20207. it was fully accruing to the assessee. The impugned payment of Rs. I Crore in the present year to PNB in settlement of the liability of SP had resulted into ownership of assets of the club to the assessee and therefore, it is as cost of purchase of assets of club and it cannot be allowed as revenue expenditure. Had the ownership of the assets of the club was required to be vested in the purchasers of plots or their association, there might have some merit in the claim of the assessee but when as per the JDA, the ownership is vested in the assessee and the plot owners have no right in the assets of the club, it cannot be said that creating the asset of the club is a revenue expenditure. Regarding commercial expediency aspect, we are of the considered opinion that this may be helpful in those cases where the expense is revenue in nature but the objection of the revenue is this much only that it is not for the purpose of business of the assessee. If the assessee is incurring some maintenance loss because the facility is provided free of cost or at subsided prices, such loss may be held to be allowable as business expenditure but even then, the cost of construction of the Guest House cannot be considered and allowed as revenue business expenditure. In the present case, this is not the case of the assessee that there is some loss in day to day running of club and such loss should be allowed by applying the principle of commercial expediency. The assessee is claiming the cost of the assets of the club as revenue expenditure which is akin to allowing of Guest House construction cost in the given example, which is not allowable by any stretch of imagination. Hence, there is no merit in the claim of the assessee. - Decided against assessee
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