Pricewaterhousecoopers Service Delivery Center (Kolkata) Private Limited, Kolkata V. ACIT, Circle - 2(2), Kolkata, Kolkata

ITA 1585/KOL/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 4503 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 05-07-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: G MALLIKARJUNA
• Assessee Lawyers: AMIT PATNI
• Keywords: Business expenditure; Revenue expenditure; Capital expenditure
• Section: 90

Judgement Text

1 ITA NO. 1585/KOL/2017 PRICEWATERHOUSE COOPERS SERVICE DELIVERY CENTER (KOLKATA) PVT. LTD., AY 2013-14 , C , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA ( ) BEFORE . . , /AND . , ) [BEFORE SHRI A. T. VARKEY, JM & SHRI M. BALAGANESH , AM] I.T.A. NO. 1585/KOL/2017 ASSESSMENT YEAR: 2013-14 PRICEWATERHOUSE COOPERS SERVICE DELIVERY CENTER (KOLKATA) PVT. LTD. (PAN: AADCG7191E) VS. ASSISTANT COMMISSIONER OF INCOME- TAX, CIRCLE-2(2), KOLKATA. APPELLANT RESPONDENT DATE OF HEARING 02.08.2018 DATE OF PRONOUNCEMENT 10.08.2018 FOR THE APPELLANT SHRI AMIT PATNI, AR FOR THE RESPONDENT SHRI G. MALLIKARJUNA, CIT, DR ORDER PER SHRI A.T.VARKEY, JM THIS APPEAL PREFERRED BY THE ASSESSEE IS AGAINST TH E ORDER OF THE LD. DRP-2, NEW DELHI DATED 30.03.2017 FOR AY 2013-14. 2. GROUND NO. 1 OF THE ASSESSEE IS AGAINST THE ACTI ON OF AO AND LD. DRP IN DISALLOWING A SUM OF RS.22,08,908/- ON ACCOUNT OF ENTRANCE FEES PAID TO CALCUTTA CRICKET & FOOTBALL CLUB. 3. BRIEFLY STATED FACTS AS NOTED BY THE AO ARE AS U NDER: IT IS SEEN FROM FORM NO.3CD THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS ACTIVITY OF CONSULTING/ SUPPORT SERVICES IN VARIOUS FIELDS INCL UDING ASSURANCE, TAX AND ADVISORY SERVICES. THE ASSESSEE NEVER EXPLAINED AS TO HOW THE CONTRIBU TION MADE TO THE CLUBS IS LINKED TO ITS BUSINESS ACTIVITY, RATHER HAS RELIED ON DIFFERENT C ASE LAWS. EVEN THE ASSESSEE NEVER EXPLAINED AS TO HOW THE CITATIONS MATCH WITH ITS BUSINESS ACT IVITY. MERE CITING OF THE CASE LAWS IS NOT SUFFICIENT TO EXPLAIN THE EXPENDITURE. IT IS DUTY O F THE ASSESSEE TO ESTABLISH TO LINK OF THE EXPENDITURE WITH ITS BUSINESS ACTIVITY. AS THE ASSE SSEE FAILED TO DISCHARGE ITS ONUS, THE EXPENDITURE IS DISALLOWED. MOREOVER, IT IS NOTED FR OM THE NOMENCLATURE OF THE EXPENDITURE THAT IT IS NOT A PAYMENT LIKE SUBSCRIPTION BUT AN EXPEND ITURE WHICH HAS BEEN PAID FOR ONE TIME. IN 2 ITA NO. 1585/KOL/2017 PRICEWATERHOUSE COOPERS SERVICE DELIVERY CENTER (KOLKATA) PVT. LTD., AY 2013-14 VIEW OF THE ABOVE, THE EXPENDITURE OF RS.22,80,908/ - IS TREATED AS CAPITAL EXPENDITURE AND DISALLOWED. 4. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE LD. DRP, WHICH WAS PLEASED TO UPHOLD THE ORDER OF AO AS UNDER: 'NO INTERFERENCE IS REQUIRED WITH THE FINDINGS OF T HE A.O.'. HENCE THE DISALLOWANCE OF RS 22,80,908/- TOWARDS EXPENDITURE INCURRED AT CLUBS S TANDS. 5. AGGRIEVED BY THE DECISION OF LD. DRP, THE ASSESS EE IS BEFORE US. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. BEFORE US, THE LD. AR FOR THE ASSESSEE SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE COMPANY BY THE ORDER OF THIS TRIBUNAL IN ITS OWN CA SE FOR AY 2012-13 [ITANO. 51/KOL/2017]. IN THIS REGARD HE ALSO SUBMITTED THAT THE CAPTIONED EXPENDITURE IS INCURRED TO RUN THE BUSINESS MORE EFFICIENTLY. ACCORDING TO HIM , THE MEMBERSHIP OF THE CLUB GIVES AN OPPORTUNITY TO THE DIRECTORS AND OTHER EMPLOYEES OF THE COMPANY TO GET TOGETHER WITH THEIR BUSINESS ASSOCIATES, CONDUCT MEETINGS AND DISCUSSIO NS WITH THEM WHICH GOES ON TO ENHANCE THE BUSINESS PROSPECTS OF THE ASSESSEE COMPANY. IT WAS BROUGHT TO OUR NOTICE THAT THE ASSESSEE SINCE IS ENGAGED IN THE BUSINESS OF PROVID ING ACCOUNTING, TAXATION AND ASSURANCE SERVICES TO ITS CLIENT NUMEROUS MEETINGS HAVE TO BE HELD AND FOR THAT VARIOUS EXECUTIVES FROM VARIOUS CUSTOMERS/CLIENT HAS TO VISIT THE ASSESSEE COMPANY ON REGULAR BASIS AND, THEREFORE, THE MEMBERSHIP IN THE CLUB PROVIDES AN EXCELLENT PL ATFORM FOR THE DIRECTORS AND EMPLOYEES TO GET TOGETHER WITH THE DELEGATES/CLIENTS WHICH IS NECESSARY FOR THE ENHANCEMENT OF BUSINESS OF THE ASSESSEE, WHICH, ACCORDING TO LD. AR, IS NEC ESSARY FOR SMOOTH RUNNING OF THE BUSINESS. HENCE, IT WAS SUBMITTED THAT THE EXPENDIT URE INCURRED FOR CLUB MEMBERSHIP CONSTITUTES REVENUE EXPENDITURE. ON THE OTHER HAND , THE LD DR RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. WE NOTE THAT THE ISSUE IS SQUAR ELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2012-13 DATED 15.12.2017 WHEREIN THE TRIBUNAL VIDE PARA 8 WHILE ALLOWING THE ASSESSE ES APPEAL HAS OBSERVED AS UNDER: 8.THE CORPORATE ISSUE IS IN RESPECT OF CLUB EXPENSE S WHICH ASSESSEE CLAIMED TO BE OF RS.11,03,000/- WHICH WAS NOT ALLOWED BY THE AO. WE NOTE THAT THE HONBLE SUPREME COURT IN CIT VS. UNITED GLASS MFG. CO. IN CIVIL APPEAL NO. 447 OF 2012 WHICH IS PLACED AT PAGES 1 AND 2 OF THE PAPER BOOK, WHEREIN THE HONBLE SUPREM E COURT HAS CLEARLY HELD THAT CLUB MEMBERSHIP FEES IS PURELY BUSINESS EXPENSES, THEREF ORE, SINCE THIS ISSUE IS NO LONGER RES 3 ITA NO. 1585/KOL/2017 PRICEWATERHOUSE COOPERS SERVICE DELIVERY CENTER (KOLKATA) PVT. LTD., AY 2013-14 INTEGRA, WE DIRECT THE AO TO ALLOW THE EXPENDITURE INCURRED BY THE ASSESSEE COMPANY AS CLUB EXPENDITURE. 7. IN VIEW OF THE ABOVE, BY FOLLOWING THE DECISION CITED SUPRA, WE DIRECT THE AO TO ALLOW THE EXPENDITURE INCURRED BY THE ASSESSEE COMP ANY AS CLUB EXPENSES. THIS GROUND OF APPEAL OF ASSESSEE IS ALLOWED. 8. GROUND NO. 2 OF ASSESSEES APPEAL IS IN RESPECT OF NOT ALLOWING RELIEF U/S. 90 OF THE ACT FOR CREDIT OF THE TAXES PAID OUTSIDE INDIA. TH E LD. AR FOR THE ASSESSEE AT THE TIME OF HEARING DID NOT PRESS THIS GROUND. HENCE, THE SAME IS DISMISSED BEING NOT PRESSED. 9. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 10/08/201 8 SD/- SD/- (M. BALAGANESH) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 10TH AUGUST, 2018 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 APPELLANT PRICEWATERHOUSE COOPERS SERVICE DELIVER Y CENTER (KOLKATA) PVT. LTD., PLOT NO. &-14, BLOCK EP, SECTOR-V, SALT LAKE CITY, KOLKA TA-700 091. 2 RESPONDENT ACIT, CIRCLE-2(2), KOLKATA. 3 4 5 PR.CIT-1, KOLKATA. D CIT, CIR-2(2), KOLKATA DR, KOLKATA BENCHES, KOLKATA (SENT THROUGH E-MAIL) / TRUE COPY, BY ORDER, SR. PVT. SECRETARY