M/s. Amix Corporation, Ahmedabad V. The Income tax Officer,Ward-10(2), Ahmedabad

ITA 1762/AHD/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5863 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-07-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 25-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P R GHOSH
• Assessee Lawyers: A P NANAVATYAR
• Keywords: Business expenditure; Revenue expenditure; Capital expenditure

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH SMC AHMEDABAD BEFORE SHRI D.C.AGRAWAL, ACCOUNTANT MEMBER M/S AMIX CORPORATION, SAMPANNA BUILDING, B/H NAVRANGPURA BUS STAND, NAVRANGPURA, AHMEDABAD- 380 009 VS. INCOME-TAX OFFICER, WARD 10(2), AHMEDABAD. (APPELLANT) .. (RESPONDENT) ASSESSEE BY :- SHRI A.P. NANAVATY,AR REVENUE BY:- SHRI P. R. GHOSH, DR O R D E R PER D. C. AGRAWAL, ACCOUNTANT MEMBER . THE ONLY GROUND TAKEN IN THIS APPEAL BY THE ASSESS EE IS ABOUT DISALLOWANCE OF CLUB MEMBERSHIP FEES OF RS.56,120/- PAID TO GUJARAT CRICKET ASSOCIATION CLUB. 2. THE ASSESSEE IS TRADING IN ELECTRONIC COMPONENTS AT AHMEDABAD. IT CLAIMED AN EXPENDITURE OF RS.56,120/- BEING ADMISSI ON FEE OF CLUB MAINTAINED BY GUJARAT CRICKET ASSOCIATION CLUB. THE ASSESSEE ALSO PRODUCED ORIGINAL RECEIPT BEFORE THE AO BUT THE AO DENIED THE CLAIM ON THE GROUND THAT EXPENSES DO NOT RELATE TO BUSINESS ACTIVITY, SUBSCRIPTION WAS PAID ON BEHALF OF PARTNER, THERE IS NO EVIDENCE THAT THE PARTNER BECAME MEMBER OF THE CLUB FOR THE PURPOSES OF BUSIN ESS OF THE FIRM, THERE IS NO MATERIAL TO SHOW THAT HIS MEMBERSHIP HAD ANY SORT OF CO-RELATION TO ITA NO.1762/AHD/2010 ASST. YEAR :2007-08 2 LEGITIMATE BUSINESS NEEDS OF THE FIRM, AND THE CLUB /STADIUM IS SITUATED AT FAR PLACE FROM WHERE THE ASSESSEE FIRM OPERATES. 3. THE LD. CIT(A) ALSO CONFIRMED THE ORDER OF AO HO LDING THAT NO EVIDENCE WHATSOEVER HAS BEEN FURNISHED BY THE ASSES SEE EITHER BEFORE THE AO OR BEFORE HIM SO AS TO SHOW THAT THERE WAS BUSIN ESS EXPEDIENCY BY OBTAINING MEMBERSHIP OF THE CLUB AND THERE IS NO DI RECT NEXUS BETWEEN THE MEMBERSHIP OF THE CLUB AND THE BUSINESS ACTIVIT Y OF THE ASSESSEE. HE REJECTED THE AFFIDAVIT FILED BY THE PARTNER OF THE FIRM IN THIS REGARD. 4. BEFORE ME, LD. AR SUBMITTED THAT CLUB MEMBERSHIP ADMISSION IS A LEGITIMATE BUSINESS EXPENDITURE AND IS DULY SUPPORT ED BY FOLLOWING JUDGMENTS :- GUJARAT STATE EXPORT CORPN. LTD. VS. CIT 209 ITR 64 9 (GUJ) ALEMBIC CHEMICAL WORKS LTD. VS. CIT 177 ITR 377 (SC ) GOVIND GLASS & INDUSTRIES LTD. VS. ACIT 56 TTJ AHD 430 ADARSH CHEMICALS & FERTILISERS LTD. VS. ITO 13 TTJ (AHD) 443 VULCAN ALLOYS & INDUSTRIES (P) LTD. VS. ITO 12 TAXM ANN 99 (AHD) (MAG) GUJARAT PETROSYNTHESE LTD. VS. DCIT 76 ITD 257 (AHD ) HE REFERRED TO THE JUDGMENT OF HON. GUJARAT HIGH CO URT IN GUJARAT STATE EXPORT CORPORATION LTD. VS. CIT (SUPRA) WHEREIN HON . HIGH COURT HAS OBSERVED AS UNDER :- APPLYING THE AFORESAID CRITERION, IN OUR VIEW, IT IS APPARENT THAT THE PAYMENT OF ENTRANCE FEE FOR BECOMING A MEMBER OF TH E SPORTS CLUB CANNOT BE TERMED AS A CAPITAL EXPENDITURE. IT IS IN THE NA TURE OF AN ADVANTAGE IN THE COMMERCIAL SENSE BUT IT IS NOT AN ADVANTAGE IN THE CAPITAL FIELD. HENCE, THE TRIBUNAL ERRED IN LAW IN REJECTING THE C LAIM OF THE ASSESSEE THAT PAYMENT OF ENTRANCE FEE TO THE SPORTS CLUB OF GUJARAT LIMITED IS AN EXPENDITURE OF REVENUE NATURE AND HOLDING THAT THE PAYMENT CONFERRED UPON THE ASSESSEE A BENEFIT OR AN ADVANTAGE OF ENDU RING NATURE AND, 3 THEREFORE, IT IS EXPENDITURE OF CAPITAL NATURE. THE REFORE, QUESTION NO.2 REQUIRES TO BE ANSWERED IN THE AFFIRMATIVE FOR THE ASSESSMENT YEAR 1974- 75 IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENU E. 5. ON THE OTHER HAND, LD. DR RELIED ON THE ORDERS O F AUTHORITIES BELOW. 6. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERU SED THE MATERIAL ON RECORD. IN MY CONSIDERED VIEW THE CLAIM OF ASSESSEE IS ALLOWABLE IN VIEW OF THE DECISION OF JURISDICTIONAL HIGH COURT ON SIM ILAR ISSUE. HON. DELHI HIGH COURT IN CIT VS. SAMTEL COLOUR LTD. (2009) 19 DTR 295 (DEL) HAS ALSO HELD THAT ADMISSION FEES PAID TOWARDS CORPORAT E MEMBERS OF THE CLUB IS ALLOWABLE AS AN EXPENDITURE FOR THE PURPOSE OF A SSESSEES BUSINESS. ACCORDINGLY THE CLAIM OF ASSESSEE IS ALLOWED. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER WAS PRONOUNCED IN OPEN COURT ON 6/7/2010 SD/- (D.C.AGRAWAL ) ACCOUNTANT MEMBER AHMEDABAD, DATED : 6/7/2010 MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD