TMI Blog2009 (1) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... Mr Ajay Vohra Ms Kavita Jha for the Respondent. JUDGMENT The judgment of the court was delivered by RAJIV SHAKDHER, J. - This is an appeal preferred by the Revenue under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the 'Act') against the judgment dated 06.07.07 passed by the Income Tax Appellate Tribunal (hereinafter referred to as the 'Tribunal') in ITA No.4037/Del/1999 in respect of assessment year 1996-97 2. The Revenue's appeal to this Court pertains to two issues. The first issue is related to allowance of depreciation to the assessee on the enhanced cost of the asset on account of fluctuation in the rate of exchange on the last date of the accounting year. The second issue pertains to allowa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertinent to point out at this stage that the CIT(A); while recording the submission of the learned counsel for the assessee, that the, clubs had various facilities for conferences, business meetings, as well as, provision for multimedia exhibition also noted the fact that the Director and senior executives could also use the club facilities for their private purposes for which they would have to incur extra expenditure out of their own pockets. Thus based on the material placed before him the CIT(A) concluded that while the membership of the clubs did provide assessee a benefit which fulfilled the business purpose test, it also resulted in benefits to the Directors and executives in their personal capacity. 3.4 Accordingly, the CIT(A) d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ittedly, was towards corporate membership. As correctly held by the Tribunal, the nature of the expenditure was one for the benefit of the assessee. The 'business purpose' basis adopted for eligibility of expenditure under Section 37 of the Act was the correct approach. This is more so in view of the Tribunal's findings that it was the assessee which nominated the employee who would avail the benefit of the corporate membership given to the assessee. 5.2 The other hurdle for qualification of the expenditure under Section 37 of the Act is that expenditure incurred should not be on capital account. The Assessing Officer came to the conclusion that the expenditure was of a capital nature based on a fallacious reasoning that the expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Supreme Court on which the Kerala High Court has relied heavily dealt with the issue with regard to fee paid to the Registrar of Companies for increase of authorised capital, that is, whether such an expense was in the nature of revenue or capital expenditure. The Supreme Court came to the conclusion that since the fee was paid to the Registrar of Companies for increase in the capital base of the assessee it was in the nature of capital expenditure. According to us the ratio of the afore-mentioned Supreme Court judgment is not applicable to the expenses incurred on an admission fee for corporate membership. We respectfully disagree with the ratio of the judgment of the Kerala High Court. In turn, we respectfully follow the ratio of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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