The ACIT,(OSD), Range-8, Ahmedabad V. M/s. Shaival Reality Pvt.Ltd., Ahmedabad

ITA 3091/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89286 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-04-2015
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 20-04-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 07-12-2011
• Court: TRIBUNAL
• Department Lawyers: P L KUREEL
• Keywords: Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI PRAMOD KUMAR ACCOUNTANT MEMBER AND SHRI S.S. GODARA JUDICIAL MEMBER ITA NO . 3091 /AHD/20 1 1 A. Y. 200 8 - 0 9 ACIT (OSD), AHMEDABAD. VS SHAIVAL REALITY PVT. LTD., A/1, MAHARAJA PALACE, OP P. RASRANJAN, NR. VIJAY CROSS ROADS, NAVRANGPURA, AHMEDABAD. PAN: AABCS 5607F (APPELLANT) (RESPONDENT) REVENUE BY : S HRI P.L. KUREEL , SR. D.R. , ASSESSEE(S) BY : NONE / DATE OF HEARING : 2 0 / 0 4 /201 5 / DATE OF PRONOUNCEMENT: 24 / 0 4 /201 5 / O R D E R PER SHRI S.S. GODARA , JUDICIAL MEMBER THIS ASSESSEE S APPEAL FOR A.Y.200 8 - 0 9, ARISE S FROM ORDER OF CIT(A) - XIV , AHM EDABAD DATED 23.09. 201 1 IN CASE APPEAL NO. CIT(A) - XIV/ ADDL. CIT, R - /2010 - 11 , DELETING DISALLOWANCE/ADDITION OF RS.35,51,000/ - BEING CLUB MEMBERSHIP FEES PAID TO KARNAVATI CLUB , IN PROCEEDINGS U/S. 143 (3) OF THE INCOME TAX ACT IN SHORT THE ACT . ITA NO. 30 91 /AHD/201 1 SHAIVAL REALITY PVT. LTD. FOR A.Y. 200 8 - 0 9 - 2 - 2. IN THE COURSE OF HEARING, THE REVENUE STRONGLY REITERATES ITS PLEADINGS AND SEEK S TO RESTORE THE IMPUGNED ADDITION OF RS.35. 51 LAC ARISEN FROM DISALLOWANCE OF MEMBERSHIP FEES PAID TO KARNAVATI CLUB. THE ASSESSEE HAS NOT CHOSEN TO APPEAR DESPITE SERVICE OF NOTICE DATED 05.03.2015. THEREFORE, IT IS PROCEEDED EX - PARTE. 3. THE ASSESSEE - COMPANY FILED ITS RETURN ON 25.08.2008 ADMITTING INCOME OF RS.2,47,65,473/ - . THE SAME WAS SUMMARILY PROCESSED. THE ASSESSING OFFICER TOOK UP SCRUTINY. HE NOTICED THE ASSESSEE - COMPA NY TO HAVE CLAIMED MEMBERSHIP AND SUBSCRIPTION FEES OF RS.37,50,376, INCLUDES PAYMENTS FOR INSTITUTION LIFE MEMBERSHIP FEES OF RS.1.5 LAC PAID TO THE AHMEDABAD MILITARY AND RIFLE TRAINING ASSOCIATION, RS.34,01,000/ - IN CASE OF KARNAVATI CLUB FOR INSTITUTIO NAL MEMBERSHIP FEES ADDITIONAL NOMINEES CHARGES . IT SUBMIT TED TO HAVE OBTAINED CORPORATE MEMBERSHIP AND ENTRANCE. THE ASSESSEE CLARIFIED ABOUT THE NATURE OF THE MEMBERSHIP FEES AND THE FACILITIES FLOWING THEREFROM. IT EXPLAINED THAT THE SAID FACILITIES ARE MEANT FOR ITS EMPLOYEES, DIRECTOR AND BUSINESS ASSOCIATES. THE ASSESSING OFFICER PERCEIVED THESE PAYMENTS TO BE NOT BRINGING ANY BENEFIT TO THE ASSESSEE OR HAVING ANY NEXUS WITH ITS BUSINESS. HE NEGATED ASSESSEE S PLEAS QUOTING CASE LAW OF ITA NO. 30 91 /AHD/201 1 SHAIVAL REALITY PVT. LTD. FOR A.Y. 200 8 - 0 9 - 3 - HON BLE DELHI H IGH COURT IN CIT VS. SAMTEL COLOR LIMITED 326 ITR 425 (DEL) AND DISALLOWED/ADDED THIS SUM OF RS.35.51 LAC . 3. THE ASSESSEE S PREFERRED AN APPEAL. THE CIT(A) HAS DELETED THE IMPUGNED DISALLOWANCE AS UNDER: 3.3 I HAVE CAREFULLY PERUSED THE ASSESSMENT OR DER AND THE SUBMISSIONS GIVEN BY THE APPELLANT. THE APPELLANT HAS MADE THE PAYMENT FOR TAKING THE INSTITUTIONAL CLUB MEMBERSHI P OF KARNAVATI CLUB AND RIFLE CLUB. IN THIS CONNECTION, THE APPELLANT HAS SUBMITTED THAT THE PAYMENT WAS MADE FOR THE PURPOSE OF B USINESS AND TO GET ADVANTAGE OF COMMERCIAL NATURE. THE APPELLANT HAS ALSO RELIED ON THE CASES OF GUJARAT STATE EXPORT CORPORATION LTD. VS. CIT [209 ITR 649, GUJARAT] AND CIT VS. SAMTEL COLOUR LTD. [326 I TR 425 , DEL H I WHEREIN I T WAS HELD T HA T THE PAYMENT OF ENTRANCE FEE FOR BECOMING MEMBER OF THE CLUB CANNOT BE TERMED AS CAPITAL EXPENDITURE. IT WAS IN THE NATURE OF ADVANTAGE IN THE COMMERCIAL SENSE BUT IT IS NOT AN ADVANTAGE IN THE CAPITAL FEE. I AM INCLINED TO AGREE WITH THE SUBMISSION MADE BY THE APPELLANT , MORE PARTICULARLY WHEN THERE IS A DIRECT DECISION OF JURISDICTIONAL HIGH COURT ON THE ISSUE. THE EXPENDITURE ON ADMISSION FEE PA I D TOWARDS CORPORATE MEMBERSHIP WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND NOT TOWARDS CAPITAL ACCOUN T AS IT ONLY FACILITATES SMOOTH AND EFFICIENT RUNNING OF BUSINESS ENTERPRISE AND DOES NOT ADD TO THE PROFIT EARNING APPARATUS OF THE BUSINESS ENTERPRISE. ACCORDINGLY, THE DISALLOWANCE OF RS, 35,51,000/ - MADE BY THE A. O. IS DIRECTED TO BE DELETED. THE GROU ND OF APPEAL IS, THEREFORE, ALLOWED. 4. WE HAVE HEARD THE REVENUE AND PERUSED THE RELEVANT FINDINGS. THERE IS NO DISPUTE ABOUT THE VERY FACTUM OF THE ASSESSEE HAVING INCURRED THE IMPUGNED EXPENDITURE AS WELL AS THE HEADS THEREOF. THE REVENUE REITERATES TH E ASSESSING OFFICER S FINDINGS . WE FIND FROM A PERUSAL OF THE HON BLE JURISDICTIONAL HIGH COURT DECISION (SUPRA) THAT VERY SIMILAR ITA NO. 30 91 /AHD/201 1 SHAIVAL REALITY PVT. LTD. FOR A.Y. 200 8 - 0 9 - 4 - EXPENSES HAVE BEEN ALLOWED AS REVENUE EXPENDITURE HOLDING IT TO BE INCURRED FOR BUSINESS PROMOTION. THE REVENUE FAILS TO QUOT E DISTINCTION OF FACTS . A ND ALSO DOES NOT REFER ANY CASE LAW TO THE CONTRARY. IN THESE CIRCUMSTANCES, WE DRAW CUE FROM HON BLE HIGH COURT DECISION AND HOLD THAT THE IMPUGNED EXP E N DITURE I S MEANT FOR SMOOTH RUNNING OF BUSINESS. THE CIT(A) S FINDINGS ARE AFF IRMED. THE REVENUE S GROUND IS REJECTED. 5. THE REVENUE S APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON THIS DAY, THE 24 APRIL, 201 5 AT AHMEDABAD. SD/ - SD/ - ( PRAMOD KUMAR ) ( S.S. GODARA ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 24 / 0 4 / 20 1 5 PRABHAT KR. KESARWANI , SR. P . S . / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) - III, AHMEDABAD 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE . / BY ORDER, / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD