M/S ISAGRO (ASIA) AGRO CHEMICALS PVT LTD., MUMBAI V. DY CIT CIRCLE-6 (3)(1), MUMBAI

ITA 6701/MUM/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 9503 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-07-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 28-10-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANPREET SINGH DUGGLE
• Keywords: Business expenditure

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI SHRI SHAMIM YAHYA (AM) & SHRI PAVANKUMAR GADALE ( JM) I.T.A. NO. 6701/MUM/2019 (ASSESSMENT YEAR 2013-14) M/S. ISAGRO (ASIA) AGRO CHEMICALS PRIVATE LIMITED UNIT NO. 1, GR.-2 ND FLOOR BRADY GLADY PLAZA, 1-447 SENAPATI BAPAT MARG LOWER PAREL MUMBAI-400 013. PAN : AAAC18431L VS. DCIT 6 TH FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI- 400020. (APPELLANT) (RESPONDENT) ASSESSEE BY NONE DEPARTMENT BY SHRI MANPREET SINGH DUGGLE DATE OF HEARING 05.05.2021 DATE OF PRONOUNCEMENT 01.07.2021 O R D E R PER SHAMIM YAHYA (AM) :- THE APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(A) DATED 16.1.2017 FOR ASSESSMENT YEAR 2013-14. 2. THE GROUNDS OF APPEAL READ AS UNDER :- 1. LD. CIT(A) ERRED IN CONFIRMING DISALLOWANCE OF RS.1,15,734/- BEING CLUB EXPENSES INCURRED BY THE APPELLANT OBSERVING THAT THER E IS NO EVIDENCE TO SHOW THAT SAID EXPENDITURE INCURRED BY A DIRECTOR ARE INCURRED WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSE. 2. LD.CIT(A) ERRED IN NOT CONSIDERING THE FACT THAT EXP ENSES WERE INCURRED THROUGH MANAGING DIRECTOR OF THE COMPANY, NOT A SHAREH OLDER FOR THE PURPOSE OF THE BUSINESS OF THE COMPANY AND THERE IS NOTHING TO SHOW THAT EXPENSES WERE NOT INCURRED FOR THE BUSINESS OF THE APP ELLANT. 3. APPELLANT PRAYED THAT DISALLOWANCE MADE BE DELETE D. 3. BRIEF FACTS OF THE CASE ARE THAT DURING THE COUR SE OF ASSESSMENT PROCEEDINGS, THE AO OBSERVED FROM COLUMN 21(A) OF T HE TAX AUDIT REPORT THAT ASSESSEE INCURRED CLUB EXPENSES AMOUNTING TO RS.1,1 5,734/- AND ASKED THE M/S. ISAGRO (ASIA) AGRO CHEMICALS P. LTD. 2 ASSESSEE AS TO WHY DISALLOWANCE IN AUDIT REPORT WER E NOT TAKEN INTO CONSIDERATION DURING THE COMPUTATION OF INCOME AND WHY THE AFORESAID AMOUNT SHOULD BE ALLOWED AS DEDUCTION. IN REPLY ASS ESSEE SUBMITTED THAT EXPENSES ARE IN THE NATURE OF BUSINESS PROMOTION IN CURRED BY THE MG DIRECTOR FOR THE PURPOSE OF BUSINESS FOR MEETING WITH THE CU STOMERS, DEALERS, STOCKISTS OF THE COMPANY AND HENCE ARE ALLOWABLE AS BUSINESS EXPENDITURE. HOWEVER, A.O. DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE ON THE GROUND THAT ASSESSEE FAILED TO ESTABLISH THAT SUCH CLUB MEMBERSHIP RESUL TED IN PROMOTION OF ITS BUSINESS AND IT WAS A PERSONAL PRIVILEGE ENTITLING THE MEMBER. 4. UPON ASSESSEES APPEAL LEARNED CIT(A) CONFIRMED THE DISALLOWANCE. 5. AGAINST THIS ORDER ASSESSEE IS IN APPEAL BEFORE US. 6. WE HAVE HEARD LEARNED DEPARTMENTAL REPRESENTATIV E AND PERUSED THE RECORDS. IT WILL BE GAINFUL TO REFER TO THE WISDOM EXPRESSED BY THE ASSESSING OFFICER IN GIVING HIS REASONS FOR REJECTING ASSESSE ES CONTENTION WITHOUT NARRATING AS TO WHAT ENQUIRY HE HAS MADE. THE MEMBERSHIP OF THE CLUB IS A PERSONAL PRIVILEGE ENTITLING THE MEMBER TO USE AND ENJOY THE PROPERTY OF THE CLUB AND ALL OTHER AMENITIES, BENEFITS AND FACILITIES PROVIDED THEREIN. THE CLUB IS THEREFORE A MEETING PLACE FOR RELAXATION, RECREATION, ENTERTAINMENT, AMUSEMENTS AND SOCIAL INTERACTION. BUT CAN IT BE SAID THAT MEMBERSHIP OF THE CLUB EITHER BY DIRECTOR OR ANY EXECUTIVES OF A COMPANY RESULTS IN PROMOTION OF BUS INESS. IT MAY BE REMOTELY POSSIBLE BUT THEN THE ONUS IS ON THE ASSESSEE TO ESTABLIS H THAT THE CLUB MEMBERSHIP HAS PROMOTED ITS BUSINESS, WITH EVIDENCE. 7. LEARNED CIT(A) WHILE CONFIRMING THE DISALLOWANCE HAS NOT DEALT WITH THE ABOVE REASONING. IN OUR CONSIDERED OPINION THERE IS NO PRESUMPTION THAT THERE CANNOT BE A BUSINESS MEETING IN A CLUB AND IT IS ON LY MEANT FOR RELAXATION. MOREOVER, THERE IS NOTHING ON RECORD AS TO WHAT EVI DENCE WAS REQUIRED WHICH ASSESSEE FAILED TO PROVIDE. HENCE, THE DISALLOWANCE BEING BASED UPON SURMISES AND CONJECTURE IS NOT SUSTAINABLE. HENCE, WE SET AS IDE THE ORDER OF LEARNED CIT(A) AND DIRECT THAT THE EXPENDITURE IS TO BE ALL OWED. M/S. ISAGRO (ASIA) AGRO CHEMICALS P. LTD. 3 8. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 1.7.2021. SD/- SD/- (PAVANKUMAR GADALE) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTAN T MEMBER MUMBAI; DATED : 01/07/2021 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR) PS ITAT, MUMBAI