TMI Blog2023 (6) TMI 1064X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Didwania for becoming member of the Cricket Club of India would inure benefits for the business of the assessee/LLP. And therefore, in the light of decision in the case of United Glass MFG Co. Ltd. [ 2012 (9) TMI 914 - SUPREME COURT] it is held to be an allowable deduction in the facts and circumstances of this case. Therefore, AO is directed to delete addition - Appeal of the assessee is allowed. - I.T.A. No.1757/Mum/2021 - - - Dated:- 25-5-2023 - SHRI ABY T. VARKEY, JM Assessee by: Shri Nishit Gandhi Revenue by: Shri Anil Gupta ORDER PER ABY T. VARKEY, JM: This is an appeal preferred by the assessee company against the order of the Ld. CIT(A)-5, Mumbai dated 29.10.2019 for AY. 2014-15. 2. At the outset, it is noted that there is considerable delay in filing of the appeal. The impugned order of the Ld. CIT(A) was passed on 29.10.2019; however, according to assessee, the delay caused in filing of appeal cannot be attributed on assessee because the brief of the case was entrusted to Ld. AR/CA Shri Uday Soman who did not inform promptly about the outcome of the impugned order to the assessee till 15.11.2019. And immediately thereafter, he entruste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds. The assessee company was operational in the relevant financial year on 01.04.2013 to 08.04.2013; and the payment made by it to the Cricket Club of India was made on 08.04.2013 i.e. Last date of operation. And the next day, company got converted into LLP; and the LLP has taken over all assets and liabilities and is continuing the business operated by the assessee company. The assessee has subscribed for membership of the Cricket Club of India by making payment of Rs.22,60,000/- on 08.04.2013 which has been claimed as expenditure which was disallowed by the AO on the reason that the assessee failed to prove that the expenditure was wholly for the purpose of business by mainly taking note that assessee company has wound up its business on 08.04.2013 and so, he disallowed it. The Ld. CIT(A) has confirmed the action on the reason that even though the assessee company has made the payment of Rs.22,60,000/- for the membership, the director of the assessee company Shri Anand Didwania got Membership in the category of Member s Son Category which is in the category of individual membership. And therefore, the expenditure cannot be allowed as a deduction. The Ld. AR brought to my notic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w contacts improve. With new contacts people can do more interactions which can be beneficial for business and profession. Therefore business organizations like company, firm, bank, co-operative society etc. functions through human agencies which may be directors or other officers of business organization. Therefore, business organizations provide facility to their officers to attend and avail services of clubs. Clubs make company or other business organization as its member. This is generally called as corporate membership. The expenses may be in nature of entrance fees, annual fees, life membership fees and reimbursement of actual expenses etc. The purpose of the expenditure is to have a suitable platform for meeting people and getting advantages of meeting many people at a time to maintain old contacts and also to make new contacts. The main purpose of the organization is to induce its officers to attend such places for maintaining and making contacts for the benefit of business. Even if some personal advantage is obtained by officers, it will be in nature of maintaining good relations with officers and in nature of staff welfare expenses. Therefore, the expenses are incurred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should not be towards capital account. In the instant case, the admission fee paid towards corporate membership was an expenditure incurred wholly and exclusively for the purpose of business and not towards capital account as it only facilitated smooth and efficient running of the business enterprise and did not add to profit earning apparatus of the business enterprise. [Para 5.2] Therefore, the Tribunal's order was to be upheld and the revenue's appeal was to be dismissed. In view of above, we reverse the order of authorities below. Hence, this ground of appeal raised by the assessee is allowed. 7. For completeness, the Ld. AR also brought to my notice that the director of assessee company had no other option but to avail membership in individual capacity because assessee company was not eligible to get the corporate membership, since it (assessee company) did not had the necessary turnover as fixed by the managing committee of club as a threshold qualification/criteria (viz Rs. 20 crores and above for the last three (3) years as certified by Statutory Auditor). Hence the assessee company was not entitled for being admitted as a corporate member, and moreover the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A) confirmed the action of AO by holding that the membership for assessee s director Shri Anand Didwania in a club in the facts of the case was personal in nature and therefore, should not be allowed. However, it is noted that the assessee company could not have got the corporate membership because as noted (supra) it didn t qualify to be a corporate member. Therefore, the question of obtaining the corporate membership does not arise. In such a backdrop, when the assessee s director Shri. Anand Didwania got membership [even though in the category of Member s Son Category ], it cannot be said that assessee/LLP won t get the benefit of the membership of director/partner. Since the expenditure incurred for club related activities are allowable as seen from the judicial-precedents noted supra, the disallowance of the claim made by assessee for sponsoring the membership by remitting the entrance fees of Rs. 22,60,000/- is allowable deduction because assessee s interest would be protected by the director/partner who would utilize his membership for the benefit of the company s/LLP s growth. The facilities of the Club would be utilized by the director/partner for meeting and interactin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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