JASANI, MUMBAI V. ASST CIT 19(2), MUMBAI

ITA 2100/MUM/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 1752 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 24-03-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: V K CHATURVEDI LD
• Assessee Lawyers: APURVA SHAH LD
• Keywords: Depreciation; Business expenditure; Commercial expediency; Revenue expenditure; Capital expenditure
• Section: 143(3); 37(1); 37

Judgement Text

ITA NO. 2100/MUM/2017 M/S. JASANI ASSESSMENT YEAR-2011-12 IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI , , BEFORE SHRI JOGINDER SINGH, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./I.T.A. NO.2100/MUM/2017 ( / ASSESSMENT YEAR: 2011-12) M/S JASANI HW 6010 TOWER H 6 TH FLOOR, BHARAT DIAMOND BOURSE BANDRA KURLA COMPLEX BANDRA (EAST), MUMBAI-400 051 / VS. ASSISTANT COMMISSIONER OF INCOME TAX-19(2) 2 ND FLOOR, MATRU MANDIR, TARDEO GRANT ROAD (WEST) MUMBAI 400 007 ./ ./PAN/GIR NO. AAAFR-7913-B ( /APPELLANT ) : ( !' / RESPONDENT ) ASSESSEE BY : APURVA SHAH, LD. AR REVENUE BY : V.K.CHATURVEDI, LD. SR. DR / DATE OF HEARING : 13/08/2018 / DATE OF PRONOUNCEMENT : 07/09/2018 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [AY] 2011-12 CONTEST THE ORDER OF THE LD. COMMISSIONER OF INCOME -TAX (APPEALS)-30 [CIT(A)], MUMBAI, APPEAL NO.CIT(A)-30/19(2)/70/15-16 DATED 24/02/2017 QUA CONFIRMATION OF CERTAIN ADDITIONS. THE ASSESSMENT F OR IMPUGNED AY WAS FRAMED BY LD. ASSISTANT COMMISSIONER OF INCOME TAX-19(2) ON 13/03/2015 U/S 143(3) WHEREIN THE INCOME OF THE ASSESSEE HAS BEEN DETERMINED AT RS.23.81 CRORES AFTER CERTAI N ADDITIONS / ITA NO. 2100/MUM/2017 M/S. JASANI ASSESSMENT YEAR-2011-12 2 DISALLOWANCES AS AGAINST RETURNED INCOME OF RS.22.9 7 CRORES FILED BY THE ASSESSEE ON 28/09/2011. DURING IMPUGNED AY, THE ASSESSEE BEING RESIDENT FIRM WAS STATED TO BE ENGAGED IN THE BUSINESS OF DIAMONDS . THE GROUNDS RAISED IN THE APPEAL READS AS UNDER:- THE COMMISSIONER OF INCOME TAX (APPEALS)-30, MUMBAI HAS ERRED: 1. IN DISALLOWING PAYMENT MADE FOR MEMBERSHIP OF A CLUB OF RS.33,20,030 FOR A PARTNER AND AN EXECUTIVE WHICH THE AO TREATED AS A CAPITAL EXPENDITURE WHEREAS THE CITA HELD THIS TO BE AN EXPENSE NOT INC URRED FOR BUSINESS PURPOSES BUT AS A PERSONAL EXPENDITURE. 2. IN CONFIRMING A DISALLOWANCE OF RS.23,95,925 CO NTRIBUTED TOWARDS SPONSORSHIP/ ADVERTISEMENT AT VARIOUS EVENTS RELATE D TO THE BUSINESS OF THE APPELLANT BY TREATING THE SAME AS DONATIONS SIMPLIC ITER AND NOT CONSIDERING THE EXPLANATIONS GIVEN. AS EVIDENT FROM GROUNDS OF APPEAL, THE ADDITION OF RS.33.20 LACS ON ACCOUNT OF CLUB MEMBERSHIP FEES AND ANOTHER ADDITION OF RS.23.95 LACS ON ACCOUNT OF SPONSORSHIP / ADVERTISEMENT IS THE SUBJECT MATTER OF PRESENT APPEAL. 2.1 DURING ASSESSMENT PROCEEDINGS, IT WAS NOTED THA T THE ASSESSEE INCURRED EXPENDITURE OF RS.60.77 LACS TO OBTAIN MEM BERSHIP OF BOMBAY CRICKET ASSOCIATION AT BKC, BANDRA FOR ITS PARTNERS AND ONE SENIOR EXECUTIVE OF THE FIRM AS PER THE FOLLOWING DETAILS: - ACCORDINGLY, THE ASSESSEE WAS ASKED TO JUSTIFY THE ABOVE EXPENDITURE. THE ASSESSEE VIDE REPLY DATED 09/02/2015 SUBMITTED THAT THE MEMBERSHIP WAS USED TO PROVIDE HOSPITALITY TO CUSTO MERS DURING THEIR VISIT TO ASSESSEES OFFICE AT BKC . HOWEVER, LD. AO NOTED THAT THE SR.NO. NAME RELATION AMOUNT PAID 1. RATILAL AND BECHARILAL & SONS PARTNER 27,57,500 2. MUKESH K. SHAH PARTNER 16,60,015 3. AMEET M. SHAH SR. EXECUTIVE 16,60,015 TOTAL 60,77,530 ITA NO. 2100/MUM/2017 M/S. JASANI ASSESSMENT YEAR-2011-12 3 AFORESAID PAYMENT WAS A ONE-TIME EXPENDITURE TO UTI LIZE THE CLUB FACILITIES OVER A LONGER PERIOD OF TIME AND FURTHER , THE PERSONAL ELEMENT IN THE SAME COULD NOT BE IGNORED. FINALLY, CONSIDERING THE FACT THAT THE ASSESSEE INCURRED CLUB EXPENDITURE OF RS.0.41 LACS IN THE IMMEDIATELY SUCCEEDING AY 2012-13, LD. AO OPINED THAT THE SAME WAS CAPITAL IN NATURE WHICH COULD NOT ALLOWED TO THE ASSESSEE U/S 37(1). 2.2 THE SECOND ADDITION OF RS.23.95 LACS PERTAINS T O EXPENDITURE TOWARDS DONATIONS AND SCHOLARSHIPS PAID TO OVERSEAS PARTIES AS PER THE FOLLOWING DETAILS:- THE ASSESSEE JUSTIFIED THE SAME VIDE ITS SUBMISSION S DATED 25/02/2015 AND SUBMITTED THAT THE EXPENDITURE WAS IN FURTHERAN CE OF BUSINESS INTEREST AND FOR THE ULTIMATE BENEFIT OF THE BUSINE SS. THE PURPOSE OF THE SAME WAS PURELY FOR PROMOTING GOOD BUSINESS RELATIO NS WITH SUPPLIERS / CUSTOMERS WITH WHOM IT HAD TO DEAL IN THE NORMAL CO URSE OF BUSINESS. HOWEVER, NOT CONVINCED, LD. AO DECLINED THE SAME BY OBSERVING AS UNDER:- THE SUBMISSIONS OF THE AR IS CONSIDERED BUT NOT FOU ND TO BE ACCEPTABLE. THE AIR INFORMATION DESCRIBES THESE TRANSACTIONS AS DONATIO N AND SPONSORSHIP. IT IS COMMENDABLE THAT THE ASSESSEE-FIRM HAS GIVEN DONATI ONS. THE INCOME TAX ACT, 1961 HAS HOWEVER HAS BEEN VERY CLEAR ON THE DONATIO NS THAT WOULD QUALIFY AS ALLOWABLE DEDUCTIONS AND THE PROVISIONS LAID OUT FO R THE SAME. HOWEVER, THE EXPENDITURE CLAIMED BY THE ASSESSEE-FIRM OF RS.23,9 5,925/- FOR DONATIONS MADE OVERSEAS DO NOT COME UNDER THE SAID PROVISIONS. THE DONATIONS MADE COULD HAVE BENEFIT FOR THE BUSINESS BUT THEY CANNOT BE CLAIMED AS A DEDUCTION U/S 37. THE HONBLE KERALA HC HAS HELD IN MALAYALA MANORAMA CO. LTD V CIT [2016] THAT THE AMOUNT CONTRIBUTED BY THE ASSESSEE IN THE INST ANT CASE MIGHT BRING GOODWILL OR ENHANCE REPUTATION OF THE ASSESSEE AMON G THE GENERAL PUBLIC AS A GOOD PHILANTHROPIST AND IN THE PROCESS IT MIGHT B OOST ITS BUSINESS. BUT THAT BY ITSELF WOULD NOT BE SUFFICIENT TO CLAIM ANY DEDU CTION U/S 37(1). SR.NO. NAME OF EVENT AMOUNT OF EXPENDITURE EQUIVALE NT INR (RS.) 1. JEWELERS FOR CHILDREN 37,500 USD 16,70,275 2. DIAMOND EMPOWERMENT FUND FOR NEW YORK 10,000 POUNDS 7,25,650 TOTAL 23,95,925/- ITA NO. 2100/MUM/2017 M/S. JASANI ASSESSMENT YEAR-2011-12 4 3. AGGRIEVED, THE ASSESSEE CONTESTED BOTH THE ADDIT IONS WITHOUT ANY SUCCESS BEFORE LD. CIT(A) VIDE IMPUGNED ORDER DATED 24/02/2017 WHEREIN THE MATTER WAS CONCLUDED AGAINST THE ASSESS EE IN THE FOLLOWING MANNER:- DECISION: 5. I HAVE GIVEN MY CAREFUL CONSIDERATION TO THE RIV AL SUBMISSIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED THE FACTUAL MATRIX OF THE CASE AS WELL AS THE APPLICABLE LEGAL POSITION, FOR ARRIVING AT THE FOLL OWING CONCLUSION. 6. GROUND NO.1 IS RAISED AGAINST THE DISALLOWANCE O F PAYMENT MADE TOWARDS MEMBERSHIP OF CLUB OF RS.66,77,350/- TREATING THE S AME AS CAPITAL EXPENDITURE. IN THE GROUND IT IS STATED THAT THE AO IS NOT RIGHT IN DISALLOWING THE SAID PAYMENT. 6.1 FOR MAKING THE ADDITION AO CALLED FOR THE DETAI LS OF RS.63,69,681/- DEBITED TOWARDS MEMBERSHIP AND SUBSCRIPTION EXPENSES AND TO SUBSTANTIATE THE EXPENSES FOR EXCLUSIVE USAGE OF BUSINESS. IN RESPONSE THE AP PELLANT STATED THAT RS.60,77,530/- WAS PAID FOR MEMBERSHIP OF BCA AT BK C, BANDRA FOR ITS PARTNERS AND TO NOMINATE SENIOR EXECUTIVES OF THE FIRM AND IT WA S USED TO PROVIDE HOSPITALITY TO CUSTOMERS AS AND WHEN REQUIRED. AO FELT THAT THE QU ANTUM IS VERY HIGH AND THE PAYMENT IS CAPITAL IN NATURE AS THE SAME IS FOR MEM BERSHIP FEES AND NOT FOR VISITS TO THE CLUB. THE EXPENDITURE IS ONE-TIME EXPENDITURE T O UTILIZE THE FACILITIES OF THE CLUB OVER A LONG PERIOD OF TIME AND THE MEMBERSHIP IS TA KEN FOR INDIVIDUALS, WHICH MEANS PERSONAL ELEMENT CANNOT BE IGNORED. IN THE SUBSEQUE NT YEARS THE AMOUNT OF EXPENDITURE UNDER THE HEAD IS VERY MEAGER, WHICH ME ANS THE EXPENSES INCURRED FOR THIS YEAR IS CAPITAL IN NATURE AND CLAIM OF THE APP ELLANT THAT THE SAME IS REVENUE IS NOT CORRECT AS THE SAME AMOUNT SHOULD BE INCURRED W HICH IS NOT THE CASE. BY REPRODUCING SECTION 37(1) OF THE ACT, AO CONCLUDED THAT THE MEMBERSHIP IS FOR THE USE OF CLUB OVER A LONG PERIOD OF TIME AND NOT FOR A LIMITED TIME AND IS NOT ALLOWABLE U/S 37 OF THE ACT AND ADDED RS.60,77,350/- TO THE T OTAL INCOME OF THE APPELLANT. 6.2 PER CONTRA, THE APPELLANT IN THE WRITTEN SUBMI SSIONS STATED THAT THE PURPOSE OF THE SAID MEMBERSHIP WAS TO ENABLE ENTERTAINING T HE CUSTOMERS BY PARTNERS AND SENIOR EXECUTIVE OF THE APPELLANT. THE ISSUE OF WHE THER OR NOT CORPORATE MEMBERSHIP FEES OR ENTRANCE FEE TO CLUBS IS ALLOWABLE REVENUE EXPENDITURE AS DECIDED IN THE JUDGMENT OF HON'BLE NIGH COURT OF DELHI IN SAMTEL C OLOUR LTD. 326 ITR 425. THE APPELLANT ALSO RELIED ON SEVERAL CASES CITED IN THE WRITTEN SUBMISSIONS (WHICH ARE REPRODUCED IN PARA-4 ABOVE), AND ALSO STATED THAT T HE AO HAS NOT RELIED ON ANY CASE AND HENCE SOUGHT RELIEF ON THIS ISSUE. 6.3 I HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIO NS ON THE ISSUE. AO CONSIDERED FOR ADDITION, AN AMOUNT OF RS.60,77,350/-, EXPENDIT URE INCURRED TOWARDS MEMBERSHIP AND SUBSCRIPTION EXPENSES, FOR THE REASO N THAT THE QUANTUM IS VERY HIGH AND IS CAPITAL IN NATURE, THE SAME IS ONE-TIME EXPENDITURE TO UTILIZE THE FACILITIES OF THE CLUB OVER A LONG PERIOD OF TIME. THE MEMBERS HIP IS TAKEN FOR INDIVIDUALS WHICH MEANS THAT THERE IS PERSONAL ELEMENT INVOLVED AND T HE SAME EXPENDITURE IS NOT INCURRED IN THE SUBSEQUENT YEARS. ITA NO. 2100/MUM/2017 M/S. JASANI ASSESSMENT YEAR-2011-12 5 6.3.1 THE APPELLANT IN TURN ARGUES THAT THE MEMBERS HIP WAS TO ENABLE ENTERTAINING THE CUSTOMERS BY THE PARTNERS AND SENIOR EXECUTIVES OF THE FIRM AND THE EXPENSES INCURRED TOWARDS CORPORATE MEMBERSHIP FEE OR ENTRAN CE FEES TO CLUB IS AN ALLOWABLE REVENUE EXPENDITURE. IN SUPPORT THE APPELLANT RELIE D ON THE CASE OF SAMTEL COLOUR LTD., 326 ITR 425 (DEL.), WHEREIN THE HON'BLE DELHI HIGH COURT HELD THAT CORPORATE MEMBERSHIP FEE PAID TO CLUBS TOWARDS CORPORATE MEMB ERSHIP 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 PROFIT RUNNING APPARATUS OF A B USINESS ENTERPRISE. 6.3.2 IN THE PRESENT CASE THE APPELLANT SUBMITS THA T THE SAID EXPENDITURE IS TOWARDS CORPORATE MEMBERSHIP FEE FOR OBTAINING MEMBERSHIP A T THE MCA CLUB LOCATED AT BKC TO ENABLE ENTERTAINING THEIR CUSTOMERS BY THE P ARTNERS AND SENIOR EXECUTIVES OF THE APPELLANT, SUCH EXPENDITURE IS NOT IN THE NATUR E OF CAPITAL EXPENDITURE, WHICH IS CLEARLY DECIDED IN THE ABOVE CITED CASE. HOWEVER, I N THE ASSESSMENT ORDER, AO STATED THAT THE MEMBERSHIP IS IN THE INDIVIDUAL NAM ES, WHICH MEANS THAT THE PERSONAL ELEMENT CANNOT BE IGNORED. IN PAGE NO. 2 O F THE ASSESSMENT ORDER AO REPRODUCED THE WRITTEN SUBMISSIONS, WHEREIN THE APP ELLANT ADMITTED THAT THE APPELLANT FIRM HAS TAKEN THREE MEMBERSHIP OF THAT C LUB IN THE NAMES OF M/S RATILAL AND BECHARILAL & SONS OF RS.27,57,500/-, SHRI MUKES H K. SHAH(PARTNER) OF RS.16,60,015/- AND SHRI AMEET M. SHAH (SR. EXECUTIV E) OF RS. 16,60,015/- TOTALING TO RS.60,77,530/-. FROM THIS IT IS CLEAR THAT THOUG H THE AMOUNT SAID TO BE SPENT FOR CORPORATE MEMBERSHIPS, THE SAME IS NOT EXCLUSIVELY TAKEN IN THE NAME OF THE APPELLANT FIRM. 6.3.3 IN VIEW OF THE OBSERVATION OF THE AO THAT TH ERE IS PERSONAL ELEMENT IN THE SAID EXPENDITURE AND ALSO THE APPELLANT ADMITTED TH AT THE CARDS ARE IN THREE DIFFERENT NAMES, DURING THE PRESENT PROCEEDINGS, LD. AR WAS A SKED TO FURNISH THE DETAILS OF THE EXPENDITURE AND IN WHOSE NAMES THE CARDS ARE OB TAINED. IN RESPONSE THE APPELLANT STATED THAT THE CARDS ARE IN THE NAMES OF M/S RATILAL BECHARILAL AND SONS WHOSE NAME IS CHANGED TO M/S JASANI IN 2012. IN SUP PORT APPELLANT ENCLOSED COPIES OF PAN CARDS OF BOTH TO SHOW THAT PAN IS THE SAME A ND THE B FORM FILED WITH THE REGISTRAR. THIS CARD IS USED BY TWO EMPLOYEES NOMIN ATED TO USE THE FACILITY, BY NAME SHRI RAJESH JASANI AND SHRI APURVA KOTHARI. TO WARDS THIS MEMBERSHIP, THE APPELLANT PAID AN AMOUNT OF RS.27,57,500/- AND THE APPLICATION CLEARLY STATED THAT THE SAME IS FOR THE CORPORATE MEMBERSHIP. THE OTHER TWO CARDS ARE IN THE NAME OF SHRI MUKESH SHAH, A PARTNER AND SHRI AMEET SHAH, SE NIOR EXECUTIVE OF THE FIRM AND IN THE APPLICATION IT IS CLEARLY STATED THAT THE SA ME FOR INDIVIDUAL MEMBERSHIP. NO DETAILS OF PAYMENTS WERE ALSO FURNISHED WITH REGARD TO THESE TWO APPLICATIONS. 6.3.4 FROM THE ABOVE IT IS CLEAR THAT OUT OR THE T HREE MEMBERSHIPS OBTAINED, ONLY ONE IS TOWARDS CORPORATE MEMBERSHIP IN THE NAME OF THE FIRM, WHICH CAN BE OPERATED BY TWO AUTHORIZED PERSONS WHO CAN ENTERTAI N THE CUSTOMERS ON BEHALF OF THE APPELLANT FIRM. THE OTHER TWO CARDS ARE INDIVID UAL MEMBERSHIPS IN THE NAME OF THE PARTNER AND SENIOR EXECUTIVE AND ARE NOTHING TO DO WITH THE DAY TO DAY BUSINESS OF THE FIRM. IN VIEW OF THE SAME, THE AMOUNT SPENT FOR OBTAINING THESE TWO CARDS CANNOT BE ALLOWED AS THE CARDS ARE NOT IN THE NAME OF THE FIRM AND NOT UTILIZED FOR THE PURPOSE OF BUSINESS AS THE CARDS ARE INDIVIDUAL MEMBERSHIPS STANDING IN THE NAMES OF INDIVIDUALS AND ARE DIRECTLY BENEFITING TH E TWO INDIVIDUALS, ACCORDINGLY, AN AMOUNT OF RS.27,57,500/- IS ONLY ALLOWED AS BUSINES S EXPENSES SPENT TOWARDS OBTAINING THE CORPORATE MEMBERSHIP IN THE NAME OF T HE APPELLANT FIRM, OUT OF THE ITA NO. 2100/MUM/2017 M/S. JASANI ASSESSMENT YEAR-2011-12 6 TOTAL EXPENDITURE OF RS.60,77,530/ AND THE BALANCE EXPENDITURE INCURRED OF RS.33,20,030/- (RS.16,60,015/- EACH) FOR TWO INDIVI DUAL MEMBERSHIPS IS TREATED AS EXPENSES NOT INCURRED FOR THE BUSINESS PURPOSE, WHI CH IS CLEARLY BENEFITING THE INDIVIDUALS AND IS PERSONAL IN NATURE WHICH IS NOT AN ALLOWABLE EXPENDITURE. GROUND NO.1 IS TREATED AS 'PARTLY ALLOWED'. 7. IN GROUND NO. 2, THE APPELLANT RAISED THE ISSUE THAT WITHOUT PREJUDICE TO GROUND NO, 1. IT IS STATED IN THE GROUND THAT IF TH E SAME WAS A RIGHT OF AN ENDURING NATURE, THEN THE AO IS NOT RIGHT IN NOT ALLOWING TH E APPELLANT DEPRECIATION ON THE SAME BY TREATING IT AS AN INTANGIBLE ASSET. WHILE D EALING WITH GROUND NO, 1, I HAVE DECIDED THE ISSUE IN THE ABOVE PARAS, PARTLY IN FAV OR OF THE APPELLANT BY STATING THAT THE EXPENDITURE INCURRED TOWARDS OBTAINING THE CORP ORATE MEMBERSHIP IS REVENUE NATURE, TO THE EXTENT OF THE EXPENSES INCURRED TOWA RDS THE MEMBERSHIP OBTAINED IN THE NAME OF THE FIRM. PART OF THE EXPENDITURE IS NO T ALLOWED WHICH IS INCURRED TOWARDS OBTAINING THE INDIVIDUAL MEMBERSHIPS, DUE T O THE PERSONAL NATURE OF EXPENDITURE INVOLVEMENT AND NOT BECAUSE OF THE CAPI TAL NATURE OF EXPENSES. IN VIEW OF THE ABOVE, QUESTION OF ALLOWING THE DEPRECIATION DOES NOT ARISE AND THIS GROUND IS REDUNDANT AND NEEDS NO SEPARATE ADJUDICATION. GROUN D NO. 2 IS TREATED AS DISMISSED GROUND FOR THE STATISTICAL PURPOSES. 8. GROUND NO. 3 OF THE APPEAL IS AGAINST THE DISALL OWANCE OF RS.23,95,925/- CONTRIBUTED TOWARDS SPONSORSHIP/ ADVERTISEMENT. IT IS STATED IN THE GROUND THAT THE AMOUNT IS CONTRIBUTED TO VARIOUS EVENTS RELATED TO THE BUSINESS OF THE APPELLANT AND AO TREATING SIMPLY THE SAME AS DONATIONS IS NOT COR RECT. 8.1 DURING THE PROCEEDINGS, AO NOTICED FROM THE AI R INFORMATION THAT THE APPELLANT FIRM INCURRED EXPENDITURE TOWARDS DONATIO N AND SCHOLARSHIP WHICH WERE PAID TO OVERSEAS PARTIES. WHEN QUESTIONED ABOUT THE ALLOWABILITY OF THE EXPENSES, IT IS STATED THAT THE EXPENSES INCURRED ARE FOR PROMOT ING GOOD BUSINESS RELATIONSHIP WITH CUSTOMERS/ SUPPLIERS AND FOR FURTHERANCE OF BU SINESS INTEREST AND NOT IN THE NATURE OF DONATION TO ANY ORGANIZATION. IT IS ALSO STATED THAT THE INHERENT NATURE OF EXPENDITURE IS ADVERTISEMENT AND AS A MEASURE OF BU SINESS PROMOTION WHICH IS INCURRED WHOLLY AND EXCLUSIVELY FOR THE BUSINESS OF THE APPELLANT. AO CONSIDERED AND NOT ACCEPTED THE EXPLANATION, FOR THE REASON THAT T HE AIR INFORMATION CLASSIFIED THE EXPENSES AS DONATION AND SPONSORSHIP. THIS EXPENDIT URE IS NOT COMING UNDER THE PROVISIONS THAT WOULD QUALIFY AS DEDUCTIONS. FOLLOW ING THE KERALA HIGH COURT DECISION IN MALAYALA MANORAMA CO. LTD. VS. CIT, THE EXPENSES CLAIMED ARE DISALLOWED AND ADDED BACK TO THE INCOME OF THE APPE LLANT, BY THE LD. AO. 8.2 LD. AR, IN THE WRITTEN SUBMISSIONS STATED IN SU PPORT OF THE GROUND THAT THE AMOUNT OF RS.16,70,275/- (US$ 37,500) IS TO AN EVEN T 'JEWELERS FOR CHILDREN' AND THE SAME IS TOWARDS SPONSORSHIP AND ADVERTISEMENT AND I S RELATED TO THE DIRECT BUSINESS OF THE APPELLANT, THE OTHER AMOUNT OF RS.7 ,25,650/- (GBP 10,000) IS CONTRIBUTED TO THE DIAMOND EMPOWERMENT FUND OF NEW YORK TOWARDS CHAIRMAN'S COUNCIL PATRON PACKAGE, WHICH IS AGAIN FOR FURTHERI NG THE REPUTATION OF THE APPELLANT AND IS DIRECTLY LINKED TO THE DIAMOND BUSINESS OF T HE APPELLANT. THE AMOUNTS WERE NOT DONATIONS GIVEN FOR A CAUSE UNRELATED TO THE BU SINESS OF THE ASSESSEE AND QUALIFY FOR THE DEDUCTION ALLOWABLE U/S 37 OF THE A CT. THE EXPENSES INCURRED ARE PURELY IN THE COURSE OF BUSINESS AND NOT WITH ANY U LTERIOR PHILANTHROPIC PURPOSE AND THAT THE BENEFITS ENSURE TO THE BUSINESS AND HENCE ARE ALLOWABLE, AS BUSINESS EXPENSES. IT IS FURTHER STATED THAT OUT OF RS.23,95 ,925/- DISALLOWED, A SUM OF ITA NO. 2100/MUM/2017 M/S. JASANI ASSESSMENT YEAR-2011-12 7 RS.7,25,650/- ONLY IS A DONATION AND NO REASON IS G IVEN BY THE AO FOR THE OTHER DISALLOWANCE AND REQUESTED FOR RELIEF IN THE MATTER . 8.3. I HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTI ONS ON THE ISSUE AND ALSO THE INVOICE/ DONATION PLEDGE CONFIRMATIONS ENCLOSED IN SUPPORT OF THE EXPENSES INCURRED OF RS.23,95,925/-. FIRST RECEIPT IS FOR US $ 37,500 /- PAID TO M/S 'JEWELERS FOR CHILDREN' AND THE DESCRIPTION GIVEN IN THE INVOICE IS SPONSOR UNDERWRITER - 2010 FACETS OF HOPE (STERLING) $ 35,000 & DONATION - 2010 FACETS O F HOPE (FREDRICK GOLDMAN - $ 2,500. THE SECOND RECEIPT IS NAMED AS 'INVOICE/ DONATION PLEDGE CONFIRMATION' TO 'DIAMOND EMPOWERMENT FUND HELPING AFRICANS HELP AFR ICA' AND THE DESCRIPTION GIVEN IS 'CHAIRMANS COUNCIL PATRON PACKAGE GBP 10,000 . FROM THE ABOVE IT IS CLEAR THAT AMOUNTS PAID ARE CLEARLY FALLS UNDER THE CATEG ORY OF DONATION AS THE DESCRIPTION IN BOTH THE INVOICES ARE CLEARLY DESCRIBED THE PAYM ENTS 'DONATION'. IN VIEW OF THE ABOVE, CONTENTIONS OF THE APPELLANT THAT THE EXPENS ES ARE ADVERTISEMENT AND A MEASURE OF BUSINESS PROMOTION ARE REJECTED. MOREOVE R, THE APPELLANT MISERABLY FAILED TO EXPLAIN HOW THE EXPENSES ARE LINKED TO SA LES PROMOTION AND ARE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. IN VIEW OF THE SAME I AM IN AGREEMENT WITH THE REASONING GIVEN BY THE AO THAT T HE DONATION GIVEN OVERSEAS COULD HAVE BENEFITED THE BUSINESS BUT THE SAME CANN OT BE CLAIMED AS DEDUCTION U/S 37 OF THE ACT. IN VIEW OF THE SAME THE APPELLANT'S CLAIM THAT THE EXPENSES ARE INCIDENTAL TO BUSINESS GAINS IS REJECTED AND THE AD DITION OF RS.23,95,925/- IS CONFIRMED. GROUND NO. 3 OF THE APPEAL IS 'DISMISSED '. AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4. THE LD. AUTHORIZED REPRESENTATIVE FOR ASSESSEE [ AR], APURVA SHAH , AGITATED THE ADDITIONS AS CONFIRMED BY LD. FIRST APPELLATE AUTHORITY AND SUBMITTED THAT THE AFORESAID EXPENDITURE BEING INCURRED FOR THE PURPOSE OF ASSESSEES BUSINESS, WERE ALLOWABLE U/S 37(1). PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE [DR], SHRI. V.K. CHATURVEDI, PLACED RELIANCE ON THE WELL REASONED ORDER OF THE LD. FIRS T APPELLATE AUTHORITY. 5. WE HAVE CAREFULLY HEARD THE RIVAL CONTENTIONS AN D PERUSED RELEVANT MATERIAL ON RECORD INCLUDING THE ORDER OF LOWER AUT HORITIES. SO FAR AS THE DEDUCTIBILITY OF THE MEMBERSHIP FEES IS CONCERNED, THE UNDISPUTED FACT IS THAT THE ASSESSEE HAS OBTAINED THREE MEMBERSHIPS OF THE CLUB OUT OF WHICH ONLY ONE IS CORPORATE MEMBERSHIP. UNDER THE CORPORATE MEMBERSHIP, TWO EMPLOYEES OF THE ASSESSEE FIRM WERE AUTHORIZED TO ACCESS THE FACILITIES OF THE CLUB AND THE SAME, IN OUR OPINION, WAS MORE ITA NO. 2100/MUM/2017 M/S. JASANI ASSESSMENT YEAR-2011-12 8 THAN SUFFICIENT TO CATER TO THE BUSINESS NEEDS OF T HE ASSESSEE CONSIDERING THE QUANTUM OF EXPENDITURE INCURRED BY THE ASSESSEE IN THE SUBSEQUENT AY AS CLUB EXPENDITURE. THE OTHER TWO ME MBERSHIPS WERE, BEYOND DOUBT, IN INDIVIDUAL NAMES, THE PAYMENT OF W HICH HAS BEEN MADE BY THE ASSESSEE FIRM. HOWEVER, THE SAID PAYMENT, IN OUR OPINION, FAILS TO QUALIFY THE TEST OF SECTION 37(1) THAT THE EXPENDIT URE SHOULD NOT BE OF PERSONAL IN NATURE AND SHOULD BE INCURRED WHOLLY AN D EXCLUSIVELY FOR THE PURPOSE OF ASSESSEES BUSINESS. NOTHING HAS BEEN BR OUGHT ON RECORD TO DEMONSTRATE THAT THE SAID EXPENDITURE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE BUSINESS PURPOSES OF THE ASSESS EE. FOR THE SAME REASON, THE EXPENDITURE COULD NOT BE ALLOWED TO BE CAPITALIZED. THE LD. CIT(A) HAS CLINCHED THE ISSUE IN THE PROPER PERSPEC TIVE AND THEREFORE, DOES NOT REQUIRE ANY INTERFERENCE ON OUR PART. THIS GROUND STAND DISMISSED. 6.1 THE SECOND ADDITIONS PERTAINS TO AN EXPENDITURE OF RS.23.95 LACS STATED TO BE INCURRED BY THE ASSESSEE AS ADVERTISEM ENT EXPENDITURE BUT FOUND TO BE DONATIONS IN NATURE BY THE REVENUE. THE FACTS REGARDING THE SAME HAVE ALREADY BEEN NOTED BY THE LD. FIRST APPEL LATE AUTHORITY IN PARAS 7-8 OF THE IMPUGNED ORDER AND THE SAME HAS ALREADY BEE N EXTRACTED BY US AS ABOVE. BEFORE US, THE ASSESSEE H AS PLACED THE SAME MATERIAL ON RECORD AS PLACED BEFORE LD. CIT(A) TO S UPPORT THE ADMISSIBILITY OF THIS EXPENDITURE. UPON PERUSAL OF THE SAME, WE FIND THAT THE IMPUGNED EXPENDITURE IS MORE IN THE NATURE OF CHARITIES / DONATIONS RATHER THAN IN THE NATURE OF ADVERTISEMENT EXPENDIT URE AS CLAIMED BY THE ASSESSEE. THE LD. CIT(A) AT PARA 8.3 HAS RIGHTLY NOTED THAT THE ASSESSEE MISERABLY FAILED TO EXPLAIN THAT HOW THE EXPENSES W ERE LINKED TO SALES ITA NO. 2100/MUM/2017 M/S. JASANI ASSESSMENT YEAR-2011-12 9 PROMOTION AND WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ASSESSEES BUSINESS. THUS THE PRIME CONDITIONS TO C LAIM THE DEDUCTION OF THE EXPENDITURE AS ENVISAGED BY SECTION 37(1) REMAI N UNFULFILLED WHICH LEAD US TO CONFIRM THE STAND OF LOWER AUTHORITIES I N THIS REGARD. THIS GROUND ALSO STANDS DISMISSED. 6.2 BEFORE PARTING, WE FIND THAT THE ASSESSEE HAS P LACED RELIANCE ON THE DECISION OF THIS TRIBUNAL RENDERED IN B.K.KHARE & CO. VS. ACIT [ITA NO. 4500/MUM/2014 DATED 24/10/2016] TO SUPPORT HIS CASE. HOWEVER, AFTER PERUSAL OF THE SAME, WE FIND THE SAME NOT APP LICABLE SINCE THE DECISION HAS BEEN RENDERED IN THE CONTEXT OF A PROFESSIONAL CHARTERED ACCOUNTANT FIRM MAKING PAYMENT / CONTRIBUTION TO PUNE BRANCH OF WESTERN INDIA REGIONAL COUNCIL OF THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA TO FACILITATE CONSTRUCTION OF THE INSTITUTE BUILDIN G. THE CLAIM OF THE ASSESSEE, IN THAT CASE, HAS BEEN ALLOWED ON THE PRI NCIPLE OF COMMERCIAL EXPEDIENCY, WHICH IS NOT THE CASE HERE SINCE THE ASSESSEE IS C LAIMING THE SAME TO BE ADVERTISEMENT / SALES PROMOTION EXPE NDITURE WITHOUT PROVING THE NEXUS OF THE SAME FOR LEGITIMATE BUSINE SS NEEDS OF ASSESSEES BUSINESS, IN ANY MANNER. THEREFORE, THE CASE LAW AS RELIED UPON BY THE ASSESSEE COULD BE OF NO HELP TO BOLSTER HIS CLAIM. 7. RESULTANTLY, THE ASSESSEES APPEAL STANDS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 07 TH SEPTEMBER, 2018 SD/- SD/- (JOGINDER SINGH) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED :07.09.2018 SR.PS:-THIRUMALESH ITA NO. 2100/MUM/2017 M/S. JASANI ASSESSMENT YEAR-2011-12 10 ! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. !' / THE RESPONDENT 3. ) ( ) / THE CIT(A) 4. ) / CIT CONCERNED 5. * !$+ , + , / DR, ITAT, MUMBAI 6. ,-. / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI