TMI Blog2010 (9) TMI 1084X X X X Extracts X X X X X X X X Extracts X X X X ..... th and efficient running of a business enterprise and does not add to the profit earning apparatus of a business enterprise and accordingly we are inclined to uphold the finding of the ld. CIT(A) in deleting the disallowance of ₹ 16.00 lacs made by the AO. The grounds taken by the revenue are, therefore, rejected. In the result, revenue s appeal stands dismissed. - SHRI D.K. AGARWAL, (JM) AND SHRI R.K. PANDA,(AM) For the Appellant: Shri Naresh Kumar Balodia For the Respondent: Ms. Vasanti B. Patel O R D E R Per D.K. AGARWAL (JM). This appeal preferred by the revenue is directed against the order dated 27.8.2008 passed by the ld. CIT(A) for the Assessment Year 2004-05. 2. Briefly stated facts of the case are that the assessee company is engaged in the business of trading in government bonds and treasury bills, filed return declaring income of ₹ 14,31,31,050/-. During the course of assessment proceeding it was interalia observed by the Assessing Officer that the assessee has made payment of entrance fee to a Club namely Bombay Gymkhana amounting to ₹ 16.00 lacs. On being asked as to why it should not be disallowed as being capital expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness associates has helped the assessee in extending the business relationship and promoting the business, therefore, the assessee has rightly claimed that the expenditure on payment of ₹ 16.00 lacs as entrance fee to Bombay Gymkhana is allowable revenue expenditure. The ld. CIT(A) observed that the Assessing Officer has not disputed the fact that the aforesaid expenditure has been incurred by the assessee wholly and exclusively for the purpose of business of the assessee. The Assessing Officer rejected the deduction on the ground that such payment has an enduring effect. He further observed that the expenditure brings some benefit to the appellant for a few years alone is not sufficient to treat the expenditure as an expenditure of a capital nature as has been held in the case of CIT vs. Mody Olivetty Ltd. (2004) 3 SOT 22 (Del.) . It is an undisputed fact that by becoming a member of the club and utilizing the facilities of the club for meeting and entertaining business associates has helped the assessee in extending the business relationship and promoting the business and accordingly he was of the view that such expenditure has been incurred by the assessee wholly and excl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on by the Hon ble Gujarat High Court (supra), is on the expenditure incurred by the assessee on technical know how fees i.e., increasing the yield of penicillin. Their Lordships after considering the issue in detail have held that even if the payment is made in one lumpsum which pertain to the existing business of the assessee and is in respect of improvement in the existing process and technology, the same is a revenue expenditure and is allowable as deduction. He further submits that the said decision is on different aspect and not pertaining to the membership of the club, therefore, the same is not applicable and, therefore, the decision relied on by the ld. CIT(A) in Gujarat State Export Corporation Ltd. wherein the decision in Alembic Chemical Works Co. Ltd. was followed is also not applicable. He further submits that in the case of the assessee the decision of Hon ble Kerala High court in Framatone Connector Oen Ltd. vs. DCIT (2007) 294 ITR 559(Ker.) is fully applicable. In that case identical issue regarding Membership Fee of Club was considered and Their Lordships following the decision in Punjab State Industrial Development Corpn. Ltd. vs. CIT(1997) 225 ITR 792(SC) ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en incurred by the assessee wholly and exclusively for the purpose of business of the assessee. Further we find no merit in the plea of the ld. DR that the decision in Alembic Chemical Works Co. Ltd. (supra), is not applicable to the facts of the assessee's case. In fact, Their Lordships referred to various decisions particularly the decision in the case of City of London Contract Corporation vs. Styles (1987) 2 Tax Cases 239 wherein broad area of distinction is pointed out. It is held in that case that the outlay on the acquisition of the concern would be capital while an outlay in carrying on the concern is revenue. The Court further referred to the following observations in the case of Assam Bengal Cement Companies Ltd. vs. CIT (1955) 27 ITR 34 (SC): TC 16R 841: If the expenditure is made for acquiring or bringing into existence an asset or advantage for the enduring benefit of the business it is properly attributable to capital and is of the nature of capital expenditure. If, on the other hand, it is made not for the purpose of bringing into existence any such asset or advantage but for running the business or working it with a view to produce the profits, it is a reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court in the case of Otis Elevator Co.(India) Ltd. vs. CIT (1991) 96 CTR (Bom.) 14: (1992) 195 ITR 662(Bom). 11. In assessee's own case in Bank of America Securities (India) Pvt. Ltd. (supra), the Tribunal has observed and held vide para 3.1 of the order as under : 3.1 We have perused the records and considered the rival contentions carefully. The dispute is regarding allowability of expenditure on account of entr e fees towards membership of a club as a revenue expenditure. No doubt, the payment made is one time lumpsum payment but this criteria of lumpsum payment is not decisive in understanding the true nature of an expenditure as held by Hon ble Supreme Court in case of Empire Jute Co. (124 ITR Page 1) Similarly test of enduring benefit is also not conclusive. Hon ble Supreme Court have held in the said case that what is required to be seen is whether the expenditure has resulted into an advantage in the revenue field or in the capital field. In case the expenditure has not resulted into creation of any capital asset or any new source of income and it has not changed the capital structure of the company and had been incurred only for conduct of the business ..... X X X X Extracts X X X X X X X X Extracts X X X X
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