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2016 (10) TMI 534 - ITAT MUMBAI

2016 (10) TMI 534 - ITAT MUMBAI - TM - Disallowance of Club Membership Fees - Held that:- . On going through the order of the Ld. CIT(A), it is very clear that the expenses/club membership fee paid by the assessee cannot be allowed as business expenditure as it was not incurred wholly and exclusively for the purpose of business. The assessee could not prove with evidences that the amounts paid for club membership fee was incurred for the purpose of the business. None of the findings of the Ld. C .....

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appeals are filed by the assessee against the orders of the Ld. CIT(A)-23, Mumbai dated 16.12.2013 pertaining to assessment years 2005-06 & 2006-07 arising out of the assessment orders passed u/s. 143(3) of the Act. 2. The only issue in these appeals are that the Ld. CIT(A) erred in upholding the action of the Assessing Officer in disallowing Club Membership Fees. 3. Brief facts are that the Assessing Officer while completing assessments for these two Assessment Years disallowed Club Member .....

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f club membership is not for business expediency, therefore not allowable expenses. 4. On appeal the Ld. CIT(A) sustained the order of the Assessing Officer against which the assessee went in appeal before the Tribunal. The Tribunal in ITA No. 7361/M/08 and 2164/M/2010 dated 30.9.2010 restored the issue to the file of the Ld. CIT(A) for fresh adjudication and a speaking order on this issue. The Ld. CIT(A) by order dated 30.9. 2010 once again sustained the order of the Assessing Officer in holdin .....

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fee is allowable expenditure. He submits that the club membership fee was incurred for the purpose of the expediency of the business therefore is an allowable expenditure. 6. The Ld. Departmental Representative vehemently supports the orders of the authorities below and he submits that the assessee has not proved that these expenses/Club membership fee has been incurred for the expediency of the business and the expenses incurred towards club membership is also not paid to the club but was given .....

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been able to even demonstrate that the entire amount of ₹ 12,00,000 is for club membership and the business expediency, if any, in spending money to become member of an Aurangabad based club which is far away from assessee s normal place of work. No doubt merely because club is not functional cannot be a ground enough for making the disallowance, as the authorities below have proceeded to hold, because it is the objective of the expensive, rather than end result obtained from the expenditu .....

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een incurred for the stated purposes. While so deciding the matter afresh, the CIT(A) will give a due and fair opportunity of hearing to the assessee and decide the matter by way of a speaking order in accordance with the law . 7.1. In the set aside proceedings, the Ld. CIT(A) has examined the issue elaborately with reference to the averments of the Assessing Officer and the submissions of the assessee and concluded that the expenses incurred by the assessee are not wholly and exclusively for th .....

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ds contribution for others. This is based on the submissions made by the assessee himself in the course of the assessment proceedings. The assessee has not given details of this amount of ₹ 1,25,000/- and has not shown that this was expended wholly and exclusively for the purposes of the business. The Assessing Officer's finding in the assessment order that this amount of ₹ 1 ,25,000/ - was not related to the business of the assessee and, hence, not allowable has not been controv .....

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ushty directly and only an amount of ₹ 2,50,000/ - was paid to the account of the club, when the payment is claimed to have been made towards the membership of the club, even if the said person was a promoter of the club. From the facts on record, it appears that the payments in question were made to Shri Purushty on a personal level and not for the purposes of the business of the assessee. The assessee has himself submitted that Shri Purushty had allotted contracts to the assessee and had .....

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urushty was in a position to give certain benefits in the nature of awarding contracts to the assessee, the payments made by the assessee cannot be said to have been incurred wholly and exclusively for the purposes of the business of the assessee. The expenditure which can be allowed in relation to any activity is only such which is linked to the earnings of the income from such activity. The assessee has not shown that the above payments have been made and are in the nature of expenses incurred .....

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at Mumbai, and the assessee is also residing in Mumbai, is not understandable. No doubt, how the business is to be conducted is best to be left to the discretion and judgment of the businessman, however, while assessing the total income of the assessee, the Assessing Officer is duty bound and well within his rights to examine whether the amount claimed as deduction was expended wholly and exclusively for the purposes of the business and whether the claim of the assessee to the expenditure was a .....

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