TMI Blog2023 (7) TMI 463X X X X Extracts X X X X X X X X Extracts X X X X ..... dividual except as a guest accompanied with the said individual. Thus, as far as individual assessee, is concerned, disallowance of club membership for one time entry fee is not debatable and correctly disallowed by the CPC invoking section 143(1)(a) of the Act. On merit also, the claim of club membership one time entry fee is disallowable on the ground of personal expenditure. Even if the assessee uses its club facility for soliciting customers, the recurring expenditure may be allowed as business expenditure subject to verification but not the one-time entry fee. As in the case of L Jairam Parwani vs DCIT [ 2018 (5) TMI 635 - MADRAS HIGH COURT] held that payment made for acquiring membership in a social club could not be allowed as business expenditure , more so, when there was no evidence to prove that membership of Social club was acquired for entertaining customers by the assessee. Therefore, the Ld. CPC is justified in making adjustment u/s 143(1)(a) the Act. Decided against assessee. - ITA No. 797/MUM/2023 - - - Dated:- 7-6-2023 - Before Shri Vikas Awasthy (Judicial Member) And Shri Om Prakash Kant (Accountant Member) For the Appellant : Mr. Rajesh S. K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h was paid for the entry fee of the membership of Mumbai Cricket Association, Bandra, for the benefit of the employees and for entertaining the customers of its business, therefore, same is allowable expenditure in terms of section 37 of the Act. The Ld. CIT(A), however rejected the contention of the assessee observing as under: 5.1I have carefully considered the submissions of the appellant. Appellant submitted that the amount of Rs.10,76,720/- paid to Shirke Infrastructure Ltd. which is managing the MCA Recreation Centre at Bandra Kurla Complex, Bandra East is club membership fee taken for the benefit of employees and entertaining the guests in its business. There is no doubt a business man has to entertain the guests for the business promotion. However, the issue here is, there are two kinds of payments to clubs. One is 'Club membership fee' paid as one time payment for getting the membership and second kind of payment is running expenditure paid for usage of club, food and beverages etc. There is no doubt that the expenditure incurred for using the club food and beverages expenses for entertaining the business guests is an allowable expenditure, but the 'club m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITA No. 276,277,2200 3017/Mum/2016 , (ii) Decision of Hon ble Supreme Court in the case of CIT Vs United Glass Mfg Co. Ltd in Civil Appeal no. 6447 of 2012, (iii) ITA No. ITA No. 6611/Mum/2008 in the case of DCIT v. Banc of America Securities (India) (P) Ltd. (Mum ITAT) (iv) ITA Nos.4281 4983/Mum/2011 for assessment year 2006-07 in the case of Clariant Chemicals (I) Ltd. v. Addl. CIT (Mum ITAT) and decision of Hon ble Gujrat High Court in the case of PCIT Vs Bayer Vapi P Ltd reported in (2019) 106 taxmann.com 395 (Guj). 5. On the other hand, the Ld. Departmental Representative (DR) submitted that the Ld. CPC has made adjustment on the basis of the information available in the 3CD report, which was filed along with return of income and there being variation in the 3CD report and in the return of income on the issue of membership fee, the Ld. CIT(A) is justified in upholding the adjustment in terms of section 143(1)(a) of the Act. On the merit, the learner DR submitted that the assessee has acquired club membership in the individual name which is for personal purposes and cannot be held as acquired for the purpose of the business. He submitted that any expenses fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of such adjustments either in writing or in electronic mode: 6.2 On perusal of the tax audit report in Form No. 3CD filed by the assessee, we find that under the clause 21(a), the tax auditor listed the items, which are in the nature of the capital expenditure, personal expenditure, advertisement expenditure etc. which are not allowable u/s 37(1) of the Act. The relevant clause of the tax audit report is reproduced as under for ready reference: 21 a Please furnish the details of amounts debited to the profit and loss account, being in the nature of capital, personal advertisement expenditure etc Capital expenditure Particulars Amount in Rs Personal expenditure Particulars Amount in Rs Advertisement expenditure in any souvenir, brouchure, tract, pamphlet or the like published by a political party ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilising the club services. The tax auditor has not proposed any disallowance for expenses incurred for utilising club services, whereas he has inferred amount for acquiring membership of the club as not in the nature of amount allowable under section 37 (1) of the Act. However, in the return of income, the assessee has not included said amount of membership for computation of the income and hence, the Ld. CPC has made adjustment while passing u/s 143(1) of the Act. Before us, the Ld. Counsel of the assessee submitted that the adjustment made is not falling u/s 143(1)(a) of the Act. In the decisions relied upon by the learned counsel of the assessee in the case of Chetas Gulabbhai Desai (supra) and SCV and LLP (supra), while processing the return of income under section 143(1) of the Act no opportunity was granted to the assessee to put forth his stand before disallowing the expenditure , whereas in the instant case the assessee was granted due opportunity for the proposed disallowance by the learned CPC, therefore the ratio of decisions relied upon by the learned counsel of the assessee are not applicable over the facts of the instant case . 6.5 He submitted that whether the mem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own case and for the reasons as mentioned in para 5.3 in the case of Samtel Colour Ltd. supra, we are of the view that admission fees paid towards corporate membership of the club is an expenditure incurred wholly and exclusively for the purpose of business and not towards capital account as it only facilitates smooth and efficient running of a business enterprise and does not add to the profit earning apparatus of a business enterprise and accordingly we are inclined to uphold the finding of the ld. CIT(A) in deleting the disallowance of Rs.16.00 lacs made by the Assessing Officer. The grounds taken by the revenue are, therefore, rejected. 6.7 Further, the Tribunal in the case of Clariant Chemicals (I) Ltd. (supra) held that membership entries fees paid to the club expenditure is allowable. The relevant finding is reproduced as under: 5. Before us, both the parties agreed that this issue had come up for consideration before the Tribunal in assessment year 2004 05, in assessee s own case wherein the Tribunal while allowing the assessee s claim has followed the decision of Hon'ble Jurisdictional High Court in Elevator Co. India Ltd. (supra). Thus, 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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