TMI Blog2014 (11) TMI 677X X X X Extracts X X X X X X X X Extracts X X X X ..... Income Tax Act – thus, the matter is remitted back to the AO – Decided in favour of assessee. Membership fees disallowed u/s 37(1) - Held that:- In CIT vs. Samtel Color Ltd. [2009 (1) TMI 26 - DELHI HIGH COURT] it was held that the expenditure being admission fee paid towards corporate membership was an expenditure incurred wholly and exclusively for the purpose of business and not towards capital account - divergent views are there on the issue and therefore, as held in Commissioner of Income-tax Vs Vegetable Products Ltd. [1973 (1) TMI 1 - SUPREME Court], the view favourable to the assessee should be followed – Decided in favour of assessee. Medical expenses disallowed – Held that:- There is date mentioned and amount mentioned and the amounts have been debited to account head medical expenses of Managing Director but in addition to this ledger account copy, there is no other evidence brought on record as to whether these expenses were incurred for medical expenditure of the Managing Director and whether the same is as per his terms of appointment - the assessee was asked to produce information regarding nature of illness, amount incurred on various tests, investigations sur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Appeals), in affirming the disallowance of ₹ 2,29,89,602/- has erred in law and on facts in justifying the disallowance on the grounds that assessee has claimed double deduction in respect of claim of bad debt. 7. That the CIT (Appeal), in affirming the disallowance of ₹ 2,29,89,602/- has erred in law and on facts in not appreciating that the assessee follows cash system of accounting in computing its income under the Income Tax Act 1961. 8. BECAUSE the order appealed against is contrary to the facts, law and principles of natural justice. 3. It was submitted by Learned A.R. of the assessee that the only dispute in assessment year 2006-07 is regarding allowability of assessee s claim of deduction of ₹ 2,29,89,602/- on account of bad debts written off by the assessee. He submitted that this claim of the assessee is as per law and the same should be allowed because this much bad debt was actually written off by the assessee in the books of account. He submitted that the profit loss account for this year is on page No. 5 where it can be seen that the assessee has debited this amount to the profit loss account under the head bad debts written off. 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . But even then it has to be seen that the assessee is satisfying the requirement of section 36(2) of Income Tax Act. For this purpose, we restore the matter to the file of the Assessing Officer. If the assessee can establish that provisions of section 36(2) are being satisfied, the deduction should be allowed otherwise, the Assessing Officer should pass necessary order as per law. 7. In the result, the appeal of the assessee stands allowed for statistical purposes. 8. Now we take up the appeal of the assessee for assessment year 2007-08 i.e. I.T.A. No.378/Lkw/2014. In this appeal the assessee has raised the following grounds: 1. That the authorities below have erred in law and on facts in disallowing the claim of bad debts of ₹ 1,62,40,448/-. 2. That the authorities below have erred in law and on facts in not appreciating that the claim of deduction of bad debts of ₹ 1,62,40,448/- is allowable u/s 36(1)(vii) of the Act. 3. That the CIT(Appeals), in affirming the disallowance of ₹ 1,62,40,448/- has erred in law and on facts in not appreciating that the assessee has not claimed any deduction u/s 36(1)(viia) of the Income Tax Act 1961 either in the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion nor claimed any deduction u/s 36(1)(viia) of the Act in respect of provision made for bad and doubtful debts. It was also submitted by the assessee before the Assessing Officer that the assessee has been claiming bad debts only on their actual write off under the provisions of section 36(1)(vii) of the Act and therefore, the entire amount of bad debts written off is allowable. Thereafter, the Assessing Officer says that the provision of section 36(1)(vii) is not applicable in the case of the assessee and in this case, provision of section 36(1)(viia) are applicable. Thereafter the Assessing Officer says that the assessee has made provision for bad and doubtful debts of ₹ 11,45,28,355/- and the same was as on 31/03/2006. The balance sheet of the assessee is available on page No. 5 of the paper book. As per the same, the assessee was having reserve fund and other reserve of ₹ 19,74,93,525/-. The details of the reserves are available on page No. 8 of the paper book, which includes special reserve section 36(1)(viii) of the Act of ₹ 11,45,28,355/- as on 31/03/2006 as well as on 31/03/2007. The provisions of section 36(1)(viii) are entirely different and the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Framatone Connector Oen Ltd. vs. DCIT 294 ITR 559 wherein it was held that similar payment paid to Cochin Yatch Club towards institutional membership fee, the expenditure effected by the assessee was capital in nature. This is also observed by learned CIT(A) that Hon'ble Kerala High Court has followed the principle laid down by Hon'ble Apex Court in the case of Punjab State Industrial Development Corporation Ltd. vs. CIT 225 ITR 792 but we also find that as per various other judgments of various High Courts such as Hon'ble Gujarat High Court in the case of Gujarat State Export Corporation Ltd. Vs Commissioner of Income-tax [1994] 209 ITR 649 (Guj) and Hon'ble Delhi High Court in the case of CIT vs. Samtel Color Ltd. [2009] 180 Taxman 82, it was held that the expenditure being admission fee paid towards corporate membership was an expenditure incurred wholly and exclusively for the purpose of business and not towards capital account. Hence, it is seen that divergent views are there on this issue and therefore, as per the judgment of Hon'ble Apex Court in the case of Commissioner of Income-tax Vs Vegetable Products Ltd. [1973] 88 ITR 192 (SC), the view favourable ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
