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TMI Blog2020 (4) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... embership fees. The AO asked the assessee to substantiate the above payment and why this payment cannot be treated as capital expenditure instead of revenue. In this respect, assessee vide its letter dated 21.11.2016 submitted as under:- "In the assessment proceedings your good self has raised the query regarding allowability of club membership fees paid by the assessee of Rs. 22,00,000/-In this regard we have to state as under- The assessee is mainly dealing in diamond. The assessee is carrying on business from his residence and he does not have any other place of business. In order to meet client, he became member of CCI Club by paying membership fees of Rs. 22,00,000/-. Sir the assessee turn over increase substantially in subsequ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, it has to satisfy the positive test, that it is laid out wholly and exclusively for the purpose of the business. In the above context it needs to be mentioned that section 37(1) stipulates that the expenditure incurred should be "wholly and exclusively" for the purpose of the business. The expression "wholly" has been used with reference to the quantum, while the expression 'exclusively' refers to the nature of the purpose of the activity in which the expenditure is incurred. 3. After perusing the above, AO rejected the submission of the assessee and disallowed the membership fees. 4. Aggrieved by the above order of AO, assessee preferred appeal before Ld. CIT(A) and Ld. CIT(A) confirmed the addition made by the AO and dismis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l as the orders passed by revenue authorities. We find that the identical ground raised in the present appeal has already been decided by the Coordinate Bench of ITAT in ITA No. 276, 277. 2200 & 3017/Mum/2017 in the case of DCIT vrs Deloitte Touche Tohmatsu India Pvt. Ltd, wherein it was held as under:- Business expenditure-Capital or revenue expenditure-Payment of club and hotel membership fee of director-Payment made by the assessee company towards club and hotel membership fee of a director is allowable as revenue expenditure - CIT vrs. United Glass Manufacturing Co. Ltd. (Civil Appeal no. 6447 of 2012, dated 12th Sept, 2012) 9. We also draw strength from the decision of Hon'ble Punjab & Haryana High Court in the case of CIT vrs. Groz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NGINEERS INDIA LTD. [1999] 239 ITR 237 (Delhi), CIT v. NESTLE INDIA LTD. [2008] 296 ITR 682 (Delhi), GUJARAT STATE EXPORT CORPORATION LTD. v. CIT [1994] 209 ITR 649 (Guj), CIT v. SAMTEL COLOR LTD. [2010] 326 ITR 425 (Delhi) and OTIS ELEVATOR Co. (INDIA) LTD. v. CIT [1992] 195 ITR 682 (Bom) approved. 10. In the present case, assessee has taken permanent membership of CCI Club and assessee is allowed to use the facility of the club and it can never create any capital assets. As the assessee can only utilize the facility and in case, he decides to surrender the membership, he will not get any refund. Therefore, assessee does not get any right by becoming a member. The fact that assesse utilizes the facilities for the purpose of his business a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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