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2023 (10) TMI 979 - HC - Income TaxReopening of assessment - Nature of expenses - entrance and subscription fees to Willington Sports Club (WSC) - whether benefit of the above payment is long term in nature and should have been considered as Capital Expenditure and should not have been claimed as Revenue expenditure in P & L account ? - HELD THAT:- We are unable to accept the submissions of the revenue because first of all there is no basis on which the assessing officer has formed a reason to believe that amount was paid towards entrance and subscription fees to WSC. Schedule 9 of the profit and loss account only enumerates membership and subscription and does not disclose anywhere which club it was. Moreover, petitioner has, in its reply to the notice u/s 148 of the Act, given a breakup of the amount towards entrance fees and towards subscription fees for 1 year and it is incurred for the purpose of business. Even if, we accept what has been stated in the order disposing objection that petitioner did not produce the bill to substantiate its claim, schedule 9 of the profit and loss account itself discloses that membership and subscription is recurring annual expenditure. In the schedule, it is mentioned for the year ended 31st March 2007 the amount was Rs. 2,05,639/- and for the year ended 31st March 2006 the amount was Rs. 1,98,326/-. It, therefore, shows that it was an annual expenditure and certainly of a recurring nature and has to be allowed as revenue expenditure. As decided in Lubrizol India Ltd. [2015 (8) TMI 134 - BOMBAY HIGH COURT] court was pleased to answer that expenses incurred in obtaining club membership is allowable as revenue expenditure. Thus the expenditure incurred towards entrance fees and annual membership would be a revenue expenditure because it has been incurred wholly and exclusively for the purposes of business and not towards capital account. Such expenditure only facilitates the smooth and efficient running of the business enterprise and does not add to the profit earning apparatus of the business enterprise. The impugned notice is quashed and set aside - Decided in favour of assessee.
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