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Price Water House Coopers Pvt. Ltd. Versus Assistant Commissioner of Income-tax

2016 (6) TMI 791 - ITAT KOLKATA

Disallowance of club expenses - Held that:- It cannot be doubted that assessee is an internationally reputed consultancy company having clients and business across the globe and in that process, key employees and directors had to travel to various destinations in furtherance of their business. We find that the issue is covered by the various decisions of High courts and by this tribunal in assessee’s own case for AY 2002-03. The issue is also covered by the decision of the Hon’ble Apex Court in .....

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Balaganesh, AM This appeal by assessee is arising out of order of CIT(A)-XX, Kolkata vide Appeal No. 149/CIT(A)-XX/Circle-2/2011-12/Kol dated 01.02.2013. Assessment was framed by ACIT, Circle-2, Kolkata u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the Act ) for Assessment Year 2004-05 vide his order dated 28.12.2006. 2. The only issue to be decided in this appeal is as to whether the Ld. CIT(A) is justified in upholding the disallowance of club expenses in the sum of S .....

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ertain expenses aggregating to ₹ 8,45,854/- and observed the same as personal expenditure and disallowed the same. On first appeal, the addition was upheld by the Ld. CIT(A) on the ground that though the assessee tried to co-relate the club expenses with its business but no supporting documents were produced substantiating its claim that these club expenses were not in the nature of non- business purposes. The Ld. CIT(A) also observed that there is a very thin line of difference between bu .....

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between prospective customers and/or senior executives of the assessee company, which mainly caters to the business interest of the company. These are purely for the purpose of the business. It may be appreciated that in a consultancy firm it is obvious that certain prospective clients are asked for lunch or dinner at reputed clubs because of its ambience and privacy. Although the Ld. AO inferred that such expenditure are incurred are purely personal in nature, it cannot be denied that the Ld. .....

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t;membership to clubs would provide offices and executives better contract and association with persons in good position and would result publicity. Payment of club fees was with a view to enable assessee to improve its business relations and prospects and hence an allowable business expenditure". It may be noted that this tribunal had allowed such payments to clubs in the case of Coats of India Ltd vs. DCIT [ITA 561/C/92] by following Calcutta High Court in the case of CIT vs. Ashoka Marke .....

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rest and hence is an allowable expenditure. Relying on the said principle the Tribunal held that payment to health clubs as membership subscription is allowable business expenditure. He also argued that the Act does not prescribe any disallowance on entertainment and travelling expenses. Sections 37(2) and Section 37(3) of the Act imposed certain restrictions on the allowance of entertainment and travelling expenditure. Both such sections have been withdrawn from the statute vide Finance Act 199 .....

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