TMI Blog2016 (10) TMI 424X X X X Extracts X X X X X X X X Extracts X X X X ..... find that the Hon'ble Apex Court, in the case of United Glass Mfg. Co. Ltd. (2012 (9) TMI 914 - SUPREME COURT ), has held that club membership fees incurred by an assessee is a business expenditure and has to be allowed as per provisions of section 37 of the Act. - Decided against AO Transfer pricing adjustment - selection of comparables - Held that:- We find that the AO had made adjustment as the assessee had included loss making entities in the comparables list, that the FAA had ignored the fact that two of the five comparables were showing loss , that he emphasised on net worth of the company rather than the losses suffered by the companies, that both the companies were suffering losses for continuously three years . In our opinion th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he remaining amount. After considering the submission of the assessee, the AO held that Income tax paid on behalf of expatriate s salary could not be allowed. Finally. he made a disallowance of ₹ 43, 24, 288/-. 2. 1. Aggrievd by the order of the AO the assessee preferred an appeal before the First Appellate Authority (FAA). Before him, it was argued that the assessee had borne Income tax in respect of salary paid to William Jones (WJ), that the said expenditure was in terms of employment agreement entered into with WJ, that the tax borne by the assessee had been offered for tax as part of perquisite by WJ in his assessment records, that tax on non monetary perquisites could be disallowed. After considering the submission of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hip fee paid towards the club by the assessee company was capital in nature as it was the first year of revenue generation, that it was going to bring enduring benefit to the assessee for years to come. He made a disallowance of ₹ 3. 24 lakhs. 3. 1. During the appellate proceedings the FAA, relying upon the judgment of Jurisdictional High Court in the case of OTIS Elevators Co. (I) (195ITR682) held that expenditure incurred by the assessee was wholly and exclusively for the purpose of business. He allowed the appeal filed by the assessee. 3. 2. Before us, the DR supported the order of the AO. The AR relied upon the case of United Glass Mfg. Co. Ltd. (Civil Appeal No. 6447 of 2012 dt. 12. 9. 12 of the Supreme Court). 3. 3. Aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Keynote Corporate Services Ltd. -2. 61% S K P Securities Ltd. 69. 57% VCK Capital Market Services Ltd. -25. 40% Mean 24. 02% 4. 1. After considering the submission of the assessee the AO held that out of the five comparables two were loss making and had no connection with the line of business. He reworked the comparable mean of adjusted OP/TC ratio as under :- Company Name Individual Company Mean Geojit Financial Services Ltd. 57. 39% Integrated Enterprises (India) Ltd. 21. 16% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the loss making company s were functionally similar to the assessee, that they had incurred a loss during a year, that their network remained positive, that the inclusion of loss making companies in the distribution curve was normal. Finally he deleted the addition made by the AO. 5. Before us, DR stated that the companies were constantly making losses, that same could not be selected as comparables. He referred to the case of Affinity Express India Pvt. Ltd. (ITA No. 106/PN/2012-assessment year-2004-05 dt. 09. 03. 16). The AR supported the order of the FAA. On a specific query by the Bench, the AR stated that both the companies were suffering losses in the earlier years as well as in the current year. 6. We have heard the rival subm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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