TMI Blog2010 (11) TMI 1048X X X X Extracts X X X X X X X X Extracts X X X X ..... that the expenditure claimed by the assessee should have been claimed in earlier years and so the same was not allowed. While doing so instead of disallowing the amount of ₹ 3,19,780/-, which was the prior period expense, the A.O. has considered the net debit also again and thus disallowed a total amount of ₹ 3,32,671/-. Following his orders for A.Y. 2003-04 the CIT(A) has confirmed the disallowance. It was submitted that in A.Y. 2003-04 the A.O. had disallowed only the net amount of claim and not the full expenses claimed as prior expenses. It was submitted that the assessee has no objection if the disallowance is restricted to the net amount of ₹ 12,891/- claimed in the P L Account after setting off the prior period income. 5. The learned D.R., however, objected to stating that according to the principles of accountancy the expenditure claim has to be allowed in the year in which the expenditure pertains to. Even with reference to income also his objection was that the income should have been considered in the year of receipt. Accordingly he objected to netting of expenditure and submitted that the order of the CIT(A) should be upheld. 6. We have consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. 7. Ground No. 2 pertains to the issue of Club Membership Fees. During the year the assessee has spent Club Membership fees of ₹ 1,37,500/- as Corporate Membership. It was assessee s contention that a amount of Rs.,15,00,000/- was paid on 27.07.2003 which was for a period of 10 years for utilization of the Willingdon Sports Club facilities and the assessee has claimed only proportionate amount of ₹ 1,37,500/- pertaining to A.Y. 2004- 05 and not the entire amount. The A.O. disallowed the amount holding that the same was capital in nature and for enduring benefit. The CIT(A) confirmed. 8. The learned counsel relied on the decision of the Hon'ble Bombay High Court in the case of Otis Elevators Co. (India) Ltd. 195 ITR 682 for the proposition that the expenditure is revenue in nature whereas the learned D.R. distinguished the case stating that the issue before the Hon ble Bombay High Court was with reference to subsequent fees reimbursement to the employees and not entrance fees, which is the issue before the Tribunal. 9. We have considered the issue. As seen from the details filed the Club Membership was taken in the name of the company for the benefit of Mr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing benefit to the institution. The mere fact that assessee s representative, like the Managing Director s participation in the club promoted the assesse s business did not change the character of the payment which was made once and for all. The Hon ble Kerala High Court followed the principles established by the Apex Court in Punjab State Industrial Development Corporation Ltd. vs. CIT 225 ITR 792 in arriving at the above decision. 9.1 In the case of Shah Rukh Khan in ITA No. 1489/Mum/2006 dated 23.07.2009 the Coordinate Bench of the ITAT held that Though the Hon ble High Court of Kerala in the case of Connector Oven Ltd. have taken a different view, we have to follow the view taken by Hon ble High Court of Gujarat which is favourable to the assessee has to be taken into account in view of the judgement of the Hon ble Supreme Court in the case of Vegetable Products 88 ITR 192. Various Coordinate Benches in the case of Sunithi Consultancy Services Ltd. vs. ACIT in ITA No. 3554/Mum/2007 dated 06.10.2010 and Jindal Dye Intermediate Pvt. Ltd. vs. DCIT 1 SOT 243 (Mum) and Vimal B. Shah ITA 1182/Mum/2006 dated 08.11.2008 and ACTI vs. Shri Ramesh M. Damani ITA No. 5143/Mum/2006 date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in their individual capacity or as a representative of the company. What is also required to be examined is the source of funds, whether the amounts are paid from the accounts of the Directors from their own sources and later transferred to the company or the company paid the amounts at the time of purchase eventhough they are registered in the name of the individual Directors. The A.O. simply disallowed the depreciation stating that the cars were registered in the names of the Directors. That alone cannot be a reason for disallowance unless it is examined whether the cars are purchased by the company but registered in the name of the Director or it is Director s vehicles purchased from their source treated as companies assets. Further the usage also has not been examined. It is also noticed that the CIT (A) in the later year has given findings that that assets have been purchased by the company and accordingly the depreciation is allowable following the decision of the Hon ble Supreme Court in the case of Mysore Minerals Ltd. 239 ITR 775. However, there is no finding with reference to the details of payments and ownership. For these reasons, we are of the opinion that the issue ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) erred in not allowing the appellants claim of netting of interest paid and interest income by considering the interest income as income from other sources without appreciating the fact that both are related to export business and without giving opportunity of being heard in this matter; iii) erred in treating the Technology transfer as other sources without appreciating the fact that it is the export of the technology and without giving opportunity of bring heard in this matter; iv) erred in treating the insurance claim as other sources without appreciating the fact that the same is business receipts; v) erred in treating the miscellaneous income from the business of exports as other sources and accordingly denied the deduction under section 80HHC without appreciating the fact that these are from export business; vi) without prejudice to the above, erred not applying the ratio established by the learned ACIT for section 14A/36(1)(iii) with respect to the above income; 17. It was the submission of the assessee that these issues have not been adjudicated by the CIT(A) and accordingly to restore the issue back to the file of the CIT(A). Since these grounds raised by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as business receipt and also directed to include both export turnover as well as total turnover being operational income. This decision is also in line with the decision of the Special Bench in the case of Prakash L. Shah 115 ITD 167 (Mum) (B) and also the decision of the ITAT in the case of Kiran Exports 10 SOT 584. 23. The learned D.R., however, tried to distinguish the claim on the basis of the decision of the Hon'ble Bombay High Court in the case of CIT vs. Shah Originals 327 ITR 19. The issue before the Hon ble Bombay High Court in the above stated case is with reference to receipts on account of foreign exchange fluctuations on EEFC account and interest on EEFC account. The Hon ble Bombay High Court has held that there is no proximate and direct nexus with the export transactions and hence deduction under section 80HHC does not arise. However, the facts in this case are different. The foreign exchange fluctuation arose on account of late receipt of sale proceeds and the assessee has valued the sale proceeds on the day of sale as per the exchange norms and subsequently the increase or decrease in value received has been accounted as foreign exchange gain. In view of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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