SAIFUDDIN A. ATTAR, MUMBAI V. ACIT 17(1), MUMBAI

ITA 1247/MUM/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 7780 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 29-03-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 16-02-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D SONGATE
• Assessee Lawyers: WRITTEN SUBMISSION FILED
• Keywords: Salary income; Capital expenditure
• Section: 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E MUMBAI BEFORE SHRI P.M. JAGTAP (AM) AND SMT. ASHA VIJAYAR AGHAVAN (JM) ITA NO. 1247/MUM/2010 ASSESSMENT YEAR- 2004-05 SAIFUDDIN A. ATTAR, 101, 1 ST FLOOR, YASH HEIGHTS, PLOT NO. 7 OF C.S. 312, NASBIT ROAD, MAZAGAON, MUMBAI-400 010 PAN-AACPA 2540F VS. THE ACIT 17(1), PIRAMAL CHAMBERS, MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY: WRITTEN SUBMISSION FILED RESPONDENT BY: SHRI D. SONGATE O R D E R PER ASHA VIJAYARAGHAVAN (JM) THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED A GAINST THE ORDER DATED 17.11.2009 PASSED BY THE LD. CIT(A)-29 FOR TH E ASSESSMENT YEAR 2004-05. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A QU ALIFIED CHARTERED ACCOUNTANT AND IS HAVING CONSULTANCY PRACTICE IN TH E FIELD OF ACCOUNTS, FINANCE & TAXATION SINCE LAST MORE THAN 20 YEARS. H E IS ALSO WORKING AS FINANCE CONSULTANT WITH EARNEST AND YOUNG PVT. LTD. DURING THE ASST. YEAR 2004-05 HIS INCOME TAX ASSESSMENT WAS COMPLETE D U/S.143(3) OF THE I.T. ACT DETERMINING HIS TAXABLE INCOME AT RS.2 3,40,951/-. THE ASSESSING OFFICER HAD DISALLOWED THE FOLLOWING :- CLUB MEMBERSHIP FEES RS.3,00,000/- CONVEYANCE EXPENSES RS. 5,238/- PETROL & FUEL RS. 7,034/- ITA NO. 1247/M/2010 2 SUNDRY EXPENSES RS. 5,038/- TELEPHONE EXPENSES RS. 7,638/- 3. AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE TH E LD. CIT(A) AND THE ASSESSEE VIDE HIS REPRESENTATIVES AND BY LETTER S DATED 16.10.2008 & 17.02.2009 EXPLAINED THE FACTS: 4. THE LD. CIT(A) HELD AS FOLLOWS: I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, ARGUMENTS OF THE ASSESSING OFFICER AND THE SUBMISSI ONS OF THE AR OF THE APPELLANT. I FIND THAT THE ENTRANCE FEES PAID F OR THE CLUB IS A PERSONAL EXPENDITURE INCURRED BY THE APPELLANT. IT CANNOT BE COMPARED WITH THE EXPENDITURE OF CORPORATE WHERE IT BECOMES THE BUSINESS NECESSITY. MAJOR SOURCE OF INCOME OF THE A PPELLANT IS SALARY INCOME. THERE IS NO EVIDENCE TO SHOW THAT THE CLUB WAS USED FOR THE PURPOSES OF PROFESSION. THE CASES CITED BY THE APPE LLANT ARE RELATED TO THE COMPANY ASSESSMENTS AND JUDGMENTS HAVE BEEN RENDERED ON DIFFERENT SETS OF FACTS. THEREFORE, THE ADDITION MA DE BY THE ASSESSING OFFICER IS CONFIRMED. THE THIRD AND FIFTH GROUNDS OF APPEAL ARE AGAINST DISALLOWANCE OF RS..24,935/- BEING 1/5 TH OF TOTAL EXPENSES CLAIMED RELATING TO CONVEYANCE, PETROL, SUNDRY EXPENSES AND TELEPHONE EXPENSES. THE ASSESSING OFFICER HAS DISALLOWED THE SAME FOR T HE REASONS THAT THEY HAVE NOT BEEN ADEQUATELY SUPPORTE D BY VOUCHERS AND EVIDENCE. APART FROM THIS THE AO HAS ARGUED THA T THE ELEMENT OF PERSONAL EXPENSES ARE EMBEDDED IN THESE KIND OF EXP ENDITURE CLAIMED. I FIND THAT THE APPELLANT HAS FAILED TO SU BSTANTIATE THE ALLOWABILITY OF EXPENDITURE WITH ADEQUATE EVIDENCE. THE PERSONAL ELEMENT INVOLVED ALSO CANNOT BE RULED OUT. THEREFOR E, THE ADDITION MADE BY THE AO IS SUSTAINED. 5. AGGRIEVED ASSESSEE IS IN APPEAL BEFORE US AND FI LED THE WRITTEN SUBMISSIONS AS UNDER : A. THE APPELLANT IS QUALIFIED CHARTERED ACCOUNTANT HAV ING CONSULTANCY PRACTICE IN THE FIELD OF ACCOUNTS, FINA NCE, AND TAXATION SINCE LAST MORE THAN 20 YEARS. HE WAS ALSO WORKING AS FINANCE CONSULTANT WITH EARNEST & YOUNG PVT. LTD. ITA NO. 1247/M/2010 3 B. THE APPELLANT ALL THIS YEARS HAD OFFERED FOR INCOME TAX ALONG WITH OTHER INCOME, INCOME FROM BUSINESS AND PROFESSIION AND THE SAME WERE ACCEPTED BY THE INCOME TAX AUTHORITIES. C. DURING THE FINANCIAL YEAR 2003-04 RELEVANT TO ASST. YEAR 2004-05 THE APPELLANT HAD INCURRED EXPENDITURE OF `.3,00,000/- AS ENTRANCE FEES FOR ORDINARY MEMBERSHIP OF NATIONAL SPORTS CLUB OF INDIA. THE APPELLANT AS A WISE AND PRUDENT PROFESSIONAL AN D FOR DEVELOPMENT OF HIS PROFESSIONAL PROSPECTS HAD INCUR RED THIS EXPENDITURE WHEREBY HE AS A MEMBER MAY PARTICIPATE IN THE ACTIVITIES OF THE CLUB WITH THE INTENTION OF ESTABL ISHING AND MAINTAINING PROFESSIONAL CONTACTS WITH PERSONS IN G OOD POSITION WHICH MAY RESULT IN BETTER GROWTH OF HIS PROFESSION AND AS SUCH THE EXPENDITURE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS OR PROFESSION ONLY. 6. THE ASSESSEE HAS MADE FURTHER WRITTEN SUBMISSIO NS AS UNDER: THE EXPENDITURE INCURRED BY THE APPELLANT OF RS. 3 ,00,000/- AS ENTRANCE FEES FOR ORDINARY MEMBERSHIP IS (I) NOT IN THE NATURE OF CAPITAL EXPENDITURE (II) NOT PERSONAL EXP ENDITURE (III) INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF PROFESSION OF CHARTERED ACCOUNTANCY. SECTION 37(1) DOES NOT DISCRIMINATE SO AS TO ALLOW THE EXPENDITURE ONLY TO CORPORATE AND DISALLOW EXPENDIT URE INCURRED BY INDIVIDUAL PROFESSIONAL FOR DEVELOPMENT OF HIS PROFESSION. IT ALSO DOES NOT PROHIBIT THE ASSESSEE FROM CLAIMING EXPENDITURE INCURRED WHOLLY & EXCLUSIVELY FOR PROFESSION EVEN IF THERE IS LESS INCOME FROM THE PR OFESSION AS COMPARED TO INCOME FROM ANY OTHER HEAD OF INCOME. THE ASSESSEE RELIED ON THE FOLLOWING: 1) CIT VS SAMTEL COLOR LTD. (2009) 180 TAXMAN 82 (DEL) 2) OTIS ELEVATORS *I) LTD. VS CIT 195 ITR 682 (BOM) 3) SUDIPTO SARKAR V. DY. CIT 101 ITD 229 (KOLKATA) 4) GUJARAT STATE EXPORT CORPN LTD. V. CIT (1995) 209 I TR 64 AS REGARDS EXPENSES INCURRED BY THE APPELLANT DISAL LOWED BY THE LEARNED A.O. OF CONVEYANCE EXP. RS.5,238/-, PET ROL & FUEL RS.7,034/- SUNDRY EXPENSES `RS. 5,038/- AND TELEPHONE EXP. RS.7,638/-. WE HAVE TO INFORM THAT APPELLANT HAS IN CURRED THESE EXPENSES FOR HIS PROFESSIONAL PURPOSE ONLY AS SUCH WE REQUEST YOUR ITA NO. 1247/M/2010 4 GOOD SELF TO KINDLY ALLOW THE SAME OR THE DISALLOWA NCE MAY BE REDUCED SUITABLY. 7. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON TH E ORDER OF THE AO AND LD. CIT(A). 8. WE HAVE HEARD BOTH THE PARTIES. SECTION 37(1) R EADS AS FOLLOWS: S. 37(1) : ANY EXPENDITURE (NOT BEING EXPENDITURE OF THE NATURE DESCRIBED IN SECTIONS 30 TO 36 AND NOT BEING IN THE NATURE OF CAPITAL EXPENDITURE OR PERSONAL EXPENSES OF THE ASS ESSEE), LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINESS OR PROFESSION SHALL BE ALLOWED IN COMPUTING THE INC OME CHARGEABLE UNDER TH E HEAD PROFITS AND GAINS OF BUSINESS OR P ROFESSION. 9. THE JURISDICTIONAL HIGH COURT IN THE CASE OF OTI S ELEVATOR CO. (INDIA) LTD VS CIT 195 ITR 682 HAS HELD THAT PAYMENT OF CLUB FEES MADE TO PROMOTE BUSINESS INTERESTS AND MEMBERSHIP OF CLU B WOULD PROVIDE OFFICERS BETTER CONTACT WITH PERSONS IN GOOD POSITI ON AND WOULD RESULT IN PUBLICITY, CLUB FEES IS ALLOWABLE EXPENDITURE. 10. WE ARE OF THE OPINION THAT MEMBERSHIP IN CLUBS ARE TAKEN WITH THE EXPECTATION THAT IT WOULD ENABLE THE PROFESSIONAL T O MEET PERSONS IN HIGH SOCIAL STATUS WHICH WOULD RESULT TO THE GROWTH OF THE PROFESSIONAL. THEREFORE, THE EXPLANATION IS WHOLLY AND EXCLUSIVEL Y FOR THE PURPOSE OF HIS PROFESSION AND ALLOWABLE U/S. 37(1). 11. AS REGARDS EXPENSES TOWARDS CONVEYANCE, PETROL & FUEL, SUNDRY EXPENSES AND TELEPHONE EXPENSES, THE AO HAS DISALLO WED 1/5 TH CONSIDERING THE SAME AS PERSONAL EXPENSES AND THE L D. CIT(A) HAS CONFIRMED THE SAME. 12. CONSIDERING THE FACT THAT THE ASSESSEE IS PROFE SSIONAL WHO HAS TO INCUR SUCH EXPENSES IN THE COURSE OF HIS PROFESSION , WE RESTRICT THE DISALLOWANCE TO 1/10 TH OF THE EXPENSES CLAIM. ITA NO. 1247/M/2010 5 13. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 31 ST DAY OF MARCH, 2011 SD/- SD/- (P.M. JAGTAP) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 31 ST MARCH, 2011 RJ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR E BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, I.T.A.T, MUMBAI ITA NO. 1247/M/2010 6 DATE INITIALS 1 DRAFT DICTATED ON: 29 . 0 3 .201 1 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 2 9 .0 3 .2011 ______ SR. PS/PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER: _________ ______ JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER: _________ ______ JM/AM 5. APPROVED DRAFT COMES TO THE SR. PS/PS: _________ ______ SR. PS/PS 6. KEPT FOR PRONOUNCEMENT ON: _________ ______ SR. PS/PS 7. FILE SENT TO THE BENCH CLERK: _________ ______ SR. PS/PS 8. 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK: DATE ON WHICH FILE GOES TO AR _________ ______ 10 . DATE OF DISPATCH OF ORDER: _________ ______