TMI Blog2016 (1) TMI 1414X X X X Extracts X X X X X X X X Extracts X X X X ..... nditure was incurred for the purpose of business, it was not personal expenditure or capital expenditure etc. We notice that Mrs. Lata Vasvani was not an employee or a director of the assessee company. She was not paid any other kind of compensation from the funds of the company. Normal business practice is to take the membership in the name of the company or in the name of top employees as per their service terms and conditions. Hence, in our view, the assessing officer has failed to apply his mind on the reply given by the assessee. The assessing officer, in our view, has failed to examine as to whether the conditions specified in sec. 37(1) were satisfied or not in the claim so made by the assessee. Accordingly, we are of the view, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entative in order to utilise the facilities of the club for meeting and entertaining business associates. The Ld CIT noticed that the AO has accepted the above said explanation of the assessee without examining the details such as the nature of membership fee paid, who was made the member etc. Hence the Ld CIT initiated revision proceedings u/s 263 of the Act considering the assessment order to be erroneous and prejudicial to the interests of the revenue. 3. The Ld CIT noticed that the membership fee was paid in the name of Mrs. Lata Vasvani in her personal name, who was claimed to be the representative of the assessee. It was noticed that she was neither an employee nor a director of the assessee company. Accordingly, the Ld CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of OTIS Elevator Co. (India) Ltd (1992)(195 ITR 682). He submitted that the membership fee was paid for a representative of the assessee, who could bring business for the assessee. Hence the same is allowable as deduction. Accordingly he submitted that the view taken by Ld CIT was a case of mere change of opinion and hence the revision proceeding initiated by Ld CIT is not valid on this ground also. In this regard, he placed reliance on the decision rendered by Hon ble Rajasthan High Court in the case of CIT Vs. Jain Construction Co. (2013)(344 taxmann.com 84). 6. On the contrary, the Ld D.R submitted that the so called representative named Mrs. Lata Vasvani is neither an employee nor a director of the assessee company. He su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidered by the Commissioner to be erroneous in so far as it is prejudicial to the interests of the Revenue . This provision has been interpreted by the Supreme Court in several judgments to which it is now necessary to turn. In Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83, the Supreme Court held that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer and it is only when an order is erroneous that the section will be attracted . The Supreme Court held that an incorrect assumption of fact or an incorrect application of law, will satisfy the requirement of the order being erroneous. An order passed in violation of the principles of natural justice or without appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee was accepted by the AO on the face of it. The documents furnished along with the reply letter furnished by the assessee clearly show that the membership fee was paid for Mrs. Lata Vasvani. There should not be any dispute that the club membership fee was allowed u/s 37(1) of the Act, where in there is a requirement to show that the expenditure was incurred for the purpose of business, it was not personal expenditure or capital expenditure etc. We notice that Mrs. Lata Vasvani was not an employee or a director of the assessee company. She was not paid any other kind of compensation from the funds of the company. Normal business practice is to take the membership in the name of the company or in the name of top employees as per their se ..... X X X X Extracts X X X X X X X X Extracts X X X X
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