The DCIT, Circle-3(1)(2), Ahmedabad V. M/s. Rajratna Metal Industries Ltd., Ahmedabad

ITA 793/AHD/2016

• Counselvise Citation: [2018] 123 COUNSELVISE.COM (IT) 8324 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-10-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 31-03-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Capital asset; Business income; Depreciation; Revenue expenditure
• Section: 143(3)

Judgement Text

, B IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ./ I.T.A. NO. 793/AHD/2016 ( ASSESSMENT YEAR : 2011-12) DCIT, CIR-3(1)(2), AHMEDABAD / VS. M/S RAAJRATNA METAL INDUSTRIES LTD. 909, SAKAR-III, NR. INCOME TAX CIRCLE, ASHRAM ROAD, AHMEDABAD-380014 ( APPELLANT ) .. ( / RESPONDENT ) ./ I.T.A. NO. 767/AHD/2016 ( ASSESSMENT YEAR : 2011-12) M/S RAAJRATNA METAL INDUSTRIES LTD. 909, SAKAR-III, NR. INCOME TAX CIRCLE, ASHRAM ROAD, AHMEDABAD-380014 / VS. DCIT, CIR-3(1)(2), AHMEDABAD ./ ./ PAN/GIR NO. : AAACR9980M ( APPELLANT ) .. ( / RESPONDENT ) / REVENUE BY : SHRI MUDIT NAGPAL, SR. D.R. / ASSESSEE BY : SHRI PRAKASH D. SHAH, A.R. DATE OF HEARING 31/08/2018 / DATE OF PRONOUNCEMENT 04/10/2018 / O R D E R ITA NO.793 & 767/AHD/16 [M/S. RAAJRATNA METAL INDUSTRIES LTD.] A.Y. 2011-12 - 2 - PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED CROSS APPEALS HAVE BEEN FILED AT THE INSTANCE OF THE REVENUE AND ASSESSEE AGAINST THE ORDER OF THE C OMMISSIONER OF INCOME TAX (APPEALS)-9, AHMEDABAD (CIT(A) IN SHOR T), DATED 07.01.2016 ARISING IN THE ASSESSMENT ORDER DATED 06 .02.2015 PASSED BY THE ASSESSING OFFICER (AO) UNDER S. 143(3) OF THE I NCOME TAX ACT, 1961 (THE ACT) CONCERNING ASSESSMENT YEAR 2011-12. ITA NO. 767/AHD/2016 (ASSESSEES APPEAL) 2. THE ASSESSEE IN ITS APPEAL ITA NO.767/AHD/2016 H AS CHALLENGED THE ACTION OF THE CIT(A) IN SUSTAINING THE ADDITION S MADE UNDER S.2(24)(X) OF THE ACT BY DENYING DEDUCTION UNDER S. 36(1)(VA) OF THE ACT TOWARDS EMPLOYEES CONTRIBUTION TO PF AMOUNTIN G TO RS.5,26,436/-. 3. WHEN THE MATTER WAS CALLED FOR HEARING, THE LEAR NED AR FOR THE ASSESSEE SUBMITTED THAT ADMITTEDLY THE DECISION OF THE HONBLE GUJARAT HIGH COURT IS AGAINST THE ASSESSEE ON PRINCIPLES. IT WAS HOWEVER CONTENDED THAT THE ACTUAL PAYMENT HAS BEEN MADE BEF ORE THE DUE DATE IN TERMS OF THE LIBERAL INTERPRETATION RENDERED BY THE CO-ORDINATE BENCH OF THE ITAT IN KANOI PAPER & INDUSTRIES LTD. VS. AC IT 75 TTJ 448. THE LEARNED AR ACCORDINGLY SUBMITTED THAT THE EMPLO YEES AGGREGATE CONTRIBUTION OF RS.5,26,436/- TOWARDS PF & ESIC, TH E DECISION IN GSRTC IS NOT APPLICABLE AS THE PAYMENT HAS BEEN MAD E BEFORE THE DUE DATE. THE LEARNED AR POINTED OUT TO A TABULATED ST ATEMENT AND SUBMITTED THAT WHILE THE PF & ESIC EMANATES FROM SA LARY CONCERNING MAY 2010, THE ACTUAL PAYMENT OF SALARY HAS BEEN MAD E BELATEDLY BETWEEN 7-10 OF JUNE, 2010. CONSEQUENTLY, THE DUE DATE FOR PAYMENT OF PF & ESIC FALLS IN 20-21/07/2010, WHEREAS THE AC TUAL DEPOSITS TOWARDS EMPLOYEES CONTRIBUTION OF PF & ESIC HAVE B EEN MADE ITA NO.793 & 767/AHD/16 [M/S. RAAJRATNA METAL INDUSTRIES LTD.] A.Y. 2011-12 - 3 - BETWEEN 22 TO 28TH JUNE, 2010. THEREFORE, IT WAS T HUS CONTENDED THAT ASSESSEE HAS NOT BREACHED THE DATE OF PAYMENT OF CO NTRIBUTION AS PROVIDED IN THE RELEVANT ACT. 4. THE LEARNED DR, ON THE OTHER HAND, RELIED UPON T HE ORDER OF THE CIT(A). 5. WE FIND THAT THE ISSUE IS SQUARELY COVERED IN FA VOUR OF THE ASSESSEE BY THE DECISION OF THE CO-ORDINATE BENCH O F TRIBUNAL IN THE CASE OF OSWAL INDUSTRIES LTD. VS. JCIT ITA NO. 05/A HD/2015 ORDER DATED 22.08.2017 AND HOST OF OTHER DECISIONS RELIED UPON ON BEHALF OF THE ASSESSEE. THE RELEVANT PARA OF THE CO-ORDINATE BENCH IN OSWAL INDUSTRIES (SUPRA) IS REPRODUCED HEREUNDER: 6. ON CAREFUL CONSIDERATION OF RIVAL SUBMISSIONS, WE FIND THAT ASSESSEE HAS AGITATED ADDITION TOWARDS BELATED PAYMENT OF EMPLOY EES CONTRIBUTION OF PF UNDER S.36(1)(VA) R.W.S.2(24) OF THE ACT. SECTION 36(1)( VA) PROVIDES FOR DEDUCTION WHERE ANY SUM RECEIVED BY THE ASSESSEE FROM ITS EMPLOYEES AS CONTRIBUTION TO ANY PROVIDENT FUND OR SUPERANNUATION FUND OR ANY OTHER WELFARE FUNDS FOUND SET UP IS DEPOSITED BY THE ASSESSEE IN THE RELEVANT FUND ON O R BEFORE DUE DATE. 7. THE ASSESSEE HAS TRIED TO DEMONSTRATE THAT RS .1,44,700/- TOWARDS CONTRIBUTION OF THE EMPLOYEES TO THE PF HAS BEEN DEPOSITED BY TH E ASSESSEE-EMPLOYER BEFORE THE DUE DATE IN TERMS OF INTERPRETATION RENDERED BY T HE DECISION OF THE ITAT IN THE CASE OF KANOI PAPER AND INDUSTRIES LTD.(SUPRA). WE OBSERVE THAT THE DECISION OF THE HONBLE GUJARAT HIGH COURT DOES NOT APPLY WHERE THE PAYMENT HAS BEEN MADE ON OR BEFORE THE DUE DATE. THE DEDUCTION UNDER S.3 6(1)(VA) IN SUCH CASE IS AVAILABLE WITHOUT ANY FETTERS. THEREFORE, WE CONSI DER IT EXPEDIENT TO RESTORE THE ISSUE BACK TO THE FILE OF THE AO FOR EXAMINATION OF THE FACTS IN THE LIGHT OF KANOI PAPERS(SUPRA) IN ACCORDANCE WITH LAW. 8. IN THE LIGHT AND IN PARITY WITH THE AFORESAID DE CISION OF THE CO- ORDINATE BENCH, WHILE WE AGREE WITH THE CONTENTIONS RAISED ON BEHALF OF THE ASSESSEE FOR LIABILITY OF DEDUCTION UNDER S. 36(1)(VA) OF THE ACT ON PRINCIPLES WE DEEM IT EXPEDIENT TO RESTORE THE I SSUE BACK TO THE FILE OF THE AO FOR EXAMINATION OF FACTS IN THE LIGHT OF KANNOI PAPERS (SUPRA) IN ACCORDANCE WITH LAW. ITA NO.793 & 767/AHD/16 [M/S. RAAJRATNA METAL INDUSTRIES LTD.] A.Y. 2011-12 - 4 - 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 10. WE SHALL NOW TURN TO THE REVENUES APPEAL ITA NO.793/AHD/2016. 11. THE GROUNDS OF APPEAL RAISED BY THE REVENUE REA D AS UNDER: 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.4,97,732/- MADE U/S.14A. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.48,82,847/- MADE U/S.36(1)(III) OF T HE ACT. 3. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS B Y NOT APPRECIATING THAT THE ASSESSEE FAILED TO ESTABLISH THAT NO INTEREST BEARING FUNDS WAS UTILIZED FOR BUILDING UP OF CAPITAL- WORK-IN-PROGRESS. 4. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.12,28,371/- MADE ON ACCOUNT OF EXCES S DEPRECIATION. 5. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.3,86,050/- MADE ON ACCOUNT OF DISALLOWANCE OF SPORTS CLUB FEE. 6. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS B Y NOT APPRECIATING THAT THE BENEFIT OF CLUB MEMBERSHIP IS ENDURING IN NATURE. 12. AS REGARDS, GROUND NO.1 CONCERNING DISALLOWANCE OF RS.4,97,732/- UNDER S.14A OF THE ACT, IT WAS POINTE D OUT ON BEHALF OF THE ASSESSEE THAT IT IS A MATTER OF RECORD THAT THE ASSESSEE HAS NOT EARNED ANY TAX FREE INCOME DURING THE YEAR. THIS B EING SO, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) FOR D ELETION OF THE DISALLOWANCE IN PARITY WITH THE DECISION OF THE HON BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. CORRTECH ENERGY PVT. L TD. T.A. NO. 239 OF 2014 AS WELL AS JOINT INVESTMENTS PVT. LTD. VS. CIT 372 ITR 694 (DELHI). THUS, GROUND NO.1 OF THE REVENUES APPEAL IS DISMISSED. ITA NO.793 & 767/AHD/16 [M/S. RAAJRATNA METAL INDUSTRIES LTD.] A.Y. 2011-12 - 5 - 13. GROUND NOS. 2 & 3 CONCERN ADDITION OF RS.48,82, 847/- UNDER S.36(1)(III) OF THE ACT. 14. ADDRESSING THIS ISSUE, IT WAS POINTED OUT ON BE HALF OF THE ASSESSEE THAT ON SIMILAR FACTS THE CO-ORDINATE BENC H OF TRIBUNAL IN ITA NO.1050/AHD/2015 ORDER DATED 12.05.2017 HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE IN ITS OWN CASE. THE RELEVA NT OPERATIVE PARA OF THE ORDER OF THE CO-ORDINATE BENCH CONCERNING AY 20 10-11(SUPRA) READS AS UNDER: 2. WE COME TO REVENUES APPEAL RAISING THREE SUBST ANTIVE GROUNDS. ITS FIRST GRIEVANCE IS THAT THE CIT(A) HA S ERRED IN DELETING SECTION 36(1)(III) INTEREST DISALLOWANCE / ADDITION OF RS.12,64,738/-; AS MADE IN THE COURSE OF THE REGULAR ASSESSMENT IN QUESTION FRAMED ON 27.02.2014. THE ASSESSING OFFICER INVOKED THE A BOVE DISALLOWANCE PROVISION IN FACTS OF THE INSTANT CASE AFTER NOTICING THE ASSESSEE TO HAVE CREATED CAPITAL WORK IN PROGRESS O F RS.3,63,10,080/- WITHOUT ATTRIBUTING ANY INTEREST CAPITALIZATION. H E THUS QUOTED ASSESSEES FAILURE IN ESTABLISHING NON UTILIZATION OF INTEREST BEARING FUNDS TO MAKE THE IMPUGNED DISALLOWANCE. 3. THE CIT(A) REVERSES ASSESSING OFFICERS FINDINGS AS UNDER: 4.2 I HAVE CAREFULLY CONSIDERED THE CONTENTIONS OF THE APPELLANT. I HAVE ALSO PERUSED THE ASSESSMENT ORDER AND THE SUBMISSION MADE BY THE LD. A.R. IT IS SEEN THAT FOR CAPITALIZING INTEREST AS PER THE PROVISIONS OF PROVISO TO SECTIO N 36(1)(III) FOLLOWING CONDITIONS SHOULD BE FULFILLED. 1. CAPITAL BORROWED FOR ACQUIRING CAPITAL ASSETS 2. INTEREST IS PAID IN RESPECT OF CAPITAL BORROW ED 3. THE ACQUISITION OF ASSETS SHOULD BE FOR THE PUR POSE OF EXPANSION OF AN EXISTING BUSINESS OR PROFESSION 4. INTEREST LIABILITY MAY OR MAY NOT BE CAPITAL IZED IN THE INSTANT CASE, THE LD. A.O. HAS NOT BROUGHT A NYTHING ON RECORD TO INDICATE THAT CAPITAL WAS BORROWED FOR CAPITAL WORK-IN-PROGRESS. SECONDLY, NO EVIDENCE IS THERE ON RECORD TO INDICATE THAT ANY INTEREST-BEARING FUNDS WERE UT ILIZED TO CREATE THIS CAPITAL WORK-IN-PROGRESS AND HENCE, NO INTEREST WAS PAID IN RELATION TO SUCH CAPITAL WORK-IN-PROGRE SS. THIS WAY, THE FIRST AND SECOND CONDITIONS FOR CAPITALIZI NG INTEREST ARE NOT FULFILLED. ACCORDINGLY, INTEREST I S NOT REQUIRED TO BE CAPITALIZED AS PER THE PROVISIONS OF PROVISO TO SECTION 36(1)(III). ITA NO.793 & 767/AHD/16 [M/S. RAAJRATNA METAL INDUSTRIES LTD.] A.Y. 2011-12 - 6 - IT IS WELL SETTLED LAW THAT BURDEN IS ON THE REVENU E TO PROVE THAT ANY PART OF BORROWED FUNDS WAS DIVERTED TO NON BUSINESS USE. RELIANCE IN THIS REGARD IS PLACED ON THE FOLLO WING CASE LAWS: I) SHHADIRAM & SONS V/S. DCIT 92 ITD 22 II) MODIPON LTD. V/S. LTO 22 TTJ 108 III) JCIT V/S. STERISHEETS LTD. 106 TTJ 460 IT IS NOTICED THAT THE A.O. HAD MISERABLY FAILED TO DISCHARGE HIS ONUS AND FAILED TO PROVE THAT PART OF INTEREST BEARING FUND WAS DIVERTED AS NON INTEREST BEARING F UNDS. FURTHER, THE ISSUE WAS ALSO CONCLUDED IN FAVOUR OF THE APPELLANT IN A.Y.2009-2010 BY MY PREDECESSOR AND SI NCE, THE FACTS ARE IDENTICAL IN THIS YEAR AS IT WAS IN A.Y.2 009-10, FOLLOWING THE ORDER OF MY LD. PREDECESSOR, THIS GRO UND OF APPEAL IS ALLOWED AND CAPITALIZATION OF INTEREST OF RS. 12 ,64,738 IS DELETED. 4. LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY SEE KS TO RESTORE THE IMPUGNED INTEREST DISALLOWANCE. IT IS EVIDENT FROM ABOVE EXTRACTED LOWER APPELLATE FINDINGS THAT THE CIT(A) HAS FOLLOWED HIS PRECEDING ASSESSMENT YEARS REASONING IN GRANTING R ELIEF TO THE ASSESSEE ON IDENTICAL LINES. NO DISTINCTION ON FAC TS HAS BEEN POINTED OUT IN THE COURSE OF HEARING PERTAINING TO THE TWO ASSESSMENT YEARS. MR. DHINAL SHAH THEN FILES BEFORE US THIS TRIBUNAL S ORDER IN REVENUES APPEAL ITA NO.540/AHD/2012 DECIDED ON 11. 06.2015 IN PRECEDING ASSESSMENT YEAR ADJUDICATING THE ISSUE IN QUESTION AGAINST THE REVENUE. LEARNED CO-ORDINATE BENCH OBSERVES TH EREIN THAT THE ASSESSING OFFICER HAS NOT BROUGHT ANYTHING ON RECOR D TO INDICATE INTEREST BEARING FUNDS UTILIZED IN THE CAPITAL WORK IN PROGRESS. WE ACCORDINGLY ADOPT THE SAME VIEW HEREIN AS WELL TO D ECLINE THIS FIRST SUBSTANTIVE GROUND. IN PARITY, WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) AND WE THUS DECLINE TO INTERFERE. 15. IN THE RESULT, GROUND NOS. 2 & 3 OF THE REVENUE S APPEAL ARE DISMISSED. 16. GROUND NO.4 CONCERNS ADDITION OF RS.12,28,371/- ON ACCOUNT OF ALLEGED EXCESS DEPRECIATION CLAIMED. ITA NO.793 & 767/AHD/16 [M/S. RAAJRATNA METAL INDUSTRIES LTD.] A.Y. 2011-12 - 7 - 17. AS POINTED OUT ON BEHALF OF THE ASSESSEE, THE I SSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE CO-ORDINAT E BENCH CONCERNING AY 2010-11 IN ITA NO.1050/AHD/2015 (SUPRA). THE RE LEVANT OPERATIVE PARA OF THE ORDER OF THE TRIBUNAL IS REPR ODUCED HEREUNDER: 5. THE REVENUES SECOND SUBSTANTIVE GROUND PLEADS THAT THE CIT(A) HAS ERRED IN DELETING EXCESS DEPRECIATION DISALLOWA NCE / ADDITION OF RS.12,28,371/- THEREBY NOT CONSIDERING THIS TRIBUNA LS DECISIONS IN ASSESSMENT YEARS 1996-97 AND 1998-1999. THE ASSESS ING OFFICER WENT BY CASE RECORDS OF THE SAID TWO ASSESSMENT YEARS WH EREIN DEPRECIATION WAS ALLOWED ON CERTAIN ASSETS ALTHOUGH THE ASSESSEE HAD NOT RAISED ANY SUCH CLAIM. HE THEREFORE REWORKED THE RELEVANT DEP RECIATION FIGURES. THE ISSUE TRAVELLED UP TO THE TRIBUNAL. A CO-ORDIN ATE BENCH UPHELD ASSESSING OFFICERS REASONING. HE MADE THE SAME OB SERVATIONS HEREIN AS WELL TO RESTRICT ASSESSEES DEPRECIATION CLAIM F ROM RS.15,87,03,423/- TO RS.15,74,75,052/-. THE DIFFERENTIAL AMOUNT OF R S.12,28,371/- STOOD DISALLOWED. THE CIT(A) FOLLOWS HIS ORDER PASSED IN PRECEDING ASSESSMENT YEAR 2008-09 ON THE VERY ISSUE TO DELETE THE ABOVESTATED DISALLOWANCE. 6. SHRI BIDARI VEHEMENTLY ARGUES THAT THE REVENUE D ESERVES TO SUCCEED ON THE INSTANT ISSUE AS PER TRIBUNALS DECI SIONS IN THE ABOVE TWO ASSESSMENT YEARS. HE THEN HIGHLIGHTS THE FACT THAT THIS TRIBUNAL THEREAFTER DECIDES THE IMPUGNED QUESTION IN ASSESSE ES FAVOUR IN ASSESSMENT YEAR 2009-10 WITHOUT CONSIDERING ITS EAR LIER FINDINGS. HE THUS SEEKS OUR AGREEMENT IN FOLLOWING OUR FINDINGS IN ASSESSMENT YEARS 1996-97 AND 1998-99 (SUPRA). SHRI DHINAL SHAH INFO RMS THE BENCH THAT THE RELEVANT FIGURES INVOLVED IN THE IMPUGNED ASSES SMENT YEAR QUA THIS DEPRECIATION ISSUE ARE ONLY CONSEQUENTIAL TO THOSE INVOLVED AND DECIDED IN THE IMMEDIATE PRECEDING ASSESSMENT YEAR SINCE TH ERE IS NO NEW ADDITION HEREIN. HIS CASE THEREFORE IS THAT THE PR ECEDING ASSESSMENT YEARS FINDINGS NOT MODIFIED IN ANY MANNER SO FAR SH ALL APPLY MUTATIS MUTANDIS HEREIN AS WELL. THE REVENUE FAILS TO REBU T THIS CRUCIAL FACTUAL POSITION. WE THUS FIND THAT THE CIT(A) HAS RIGHTLY DELETED THE IMPUGNED DISALLOWANCE. THE REVENUES SECOND SUBSTANTIVE GRO UND IS ACCORDINGLY REJECTED. IN PARITY, WE ENDORSE THE ACTION OF THE CIT(A). 18. IN THE RESULT, GROUND NO. 4 OF THE REVENUES AP PEAL IS DISMISSED. 18. GROUND NOS. 5 & 6 CONCERN DISALLOWANCE OF SPORT S CLUB FEES OF RS.3,86,050/-. ITA NO.793 & 767/AHD/16 [M/S. RAAJRATNA METAL INDUSTRIES LTD.] A.Y. 2011-12 - 8 - 19. THE CIT(A) HAS DEALT WITH THE ISSUE AS UNDER: 9. VIDE GROUND NO.6, THE APPELLANT HAS CHALLENGED THE ADDITION OF RS.3,86,050/-MADE BY THE A.O. THE A.O. DEALT WITH T HE ADDITION VIDE PARA-7 OF THE ASSESSMENT ORDER. THE A.O. MADE THIS DISALLOWANCE WITH THE FOLLOWING OBSERVATIONS:- '7. DISALLOWANCE OF SPORTS CLUB FEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT IS N OTICED THAT THE ASSESSEE HAS CLAIMED RS. 3,86,050/- AS CLUB FEE EXPENDITURE. DETAILS OF THE SAME WAS CALLED FOR AND IT IS GATHER ED THAT THE AMOUNT OF RS. 3,86,050/- WAS SPENT FOR ADMISSION OF SHRI VINOD SANGHVI IN SPORTS CLUB. THE AMOUNT EXPENDED IS A CA PITAL EXPENDITURE. THEREFORE, SAME IS TO BE ADDED TO THE INCOME OF THE ASSESSEE AS NOT OF REVENUE EXPENDITURE. 7.1 THE REPRESENTATIVE OF THE ASSESSEE VIDE ORDERSH EET ENTRY DATED 6/2/2015 WAS ASKED TO EXPLAIN AS TO WHY THE A BOVE SUM OF RS.3,86,050/- SHOULD NOT BE DISALLOWED AND ADDED TO THE TOTAL INCOME. AS THE SAME IS NOT ALLOWABLE UNDER THE I.T. ACT THE REPRESENTATIVE OF THE ASSESSEE HAS NOT GIVEN ANY RE PLY. THE AMOUNT SPENT FOR ADMISSION OF CLUB MEMBERSHIP IS NO T A REVENUE EXPENDITURE, THEREFORE, SAME IS NOT ALLOWABLE AS RE VENUE EXPENDITURE. IN THE INSTANT CASE THE ASSESSEE HAD E XPENDED AMOUNT OF RS. 3,86,050/- FOR ADMISSION OF SHRI VINO D SANGHVI IN SPORT CLUB. SINCE, IT IS NOT A REVENUE EXPENDITURE, THE AMOUNT OF RS. 3,86,050/- CLAIMED FOR ADMISSION TO SPORTS CLUB FEES IS HEREBY DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE.' 9.1 ON THIS ISSUE THE APPELLANT DURING THE COURSE O F APPELLATE PROCEEDINGS SUBMITTED AS UNDER :- 'THAT THE LEARNED TAG HAS ERRED IN LAW AND FACTS BY MAKING DISALLOWANCE OF SPORTS CLUB FEES OF RS. 386050/- AN D THEREFORE THE LEARNED AO BE DIRECTED TO ALLOW THE SAME WHILE COMPUTING THE TOTAL INCOME. THE OBJECTIVE OF TAKING CLUB MEMB ERSHIP IS TO PROMOTE THE BUSINESS OF THE COMPANY AND ACCORDINGLY THE SAME IS INCURRED FOR THE PURPOSE OF BUSINESS. ALSO AS PER T HE JUDGMENTS OF VARIOUS HON'BLE HIGH COURTS ENTRANCE FEES PAID T O CLUB ARE REVENUE IN NATURE AND SHOULD BE ALLOWED AS EXPENSES IN COMPUTING BUSINESS INCOME. IN THIS REGARD RELIANCE IS PLACED ON THE FOLLOWING JUDGMENTS:- 1) GUJARAT STATE EXPORT CORP. VS. CIT (1994) 209 IT R 649 (GIST OF THE SAME IS SUBMITTED HEREWITH AS ANNEXURE 6) 2) BOMBAY HIGH COURT IN THE CASE OF OT/S ELEVATOR C O. (INDIA) LTD. VS. CIT (1992) 195 ITR 682.' 9.2 I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AS WELL AS THE OBSERVATION OF THE A-O. THE A.O. HAS MADE AN ADDITI ON OF ITA NO.793 & 767/AHD/16 [M/S. RAAJRATNA METAL INDUSTRIES LTD.] A.Y. 2011-12 - 9 - RS.3,86,050/- BY DISALLOWING SPORTS CLUB FEES PAID BY THE APPELLANT, ACCORDING TO THE A.O. THE FEE PAID BY THE APPELLANT WERE CAPITAL IN NATURE AND NOT REVENUE EXPENDITURE. DURING THE APPE LLATE PROCEEDINGS A.O. HAS RELIED UPON THE JUDGMENT OF HO N'BLE GUJARAT HIGH COURT IN THE CASE OF GUJARAT STATE EXPORT CORP ORATION LTD. V/S. CIT 209 ITR 649. IT HAS BEEN HELD IN THIS CASE BY H ON'BLE JURISDICTIONAL HIGH COURT THAT ENTRANCE FEE FOR BEC OMING MEMBER OF SPORTS CLUB IS IN THE NATURE OF AN ADVANTAGE IN THE COMMERCIAL SENSE BUT NOT AN ADVANTAGE IN CAPITAL FIELD. THEREFORE, T HE SAME IS REVENUE EXPENDITURE. RESPECTFULLY RELYING ON THE DECISION O F ABOVE REFERRED JUDGMENT OF JURISDICTIONAL HIGH COURT I HEREBY DIRE CT THE A.O. TO DELETE THE ADDITION OF RS.3,86,050/- MADE ON ACCOUN T OF DISALLOWANCE OF FEES PAID TO SPORTS CLUB. ACCORDINGLY, THIS GROU ND OF APPEAL IS ALLOWED. 20. WE HAVE PERUSED THE ORDER OF THE AO AND CIT(A) AS WELL AS THE SUBMISSIONS MADE ON THE ISSUE. FROM THE ASSESSMENT ORDER, IT IS SEEN THAT THE AFORESAID AMOUNT OF RS.3,86,050/- WAS SPEN T FOR ADMISSION OF SHRI VINOD SANGHVI IN SPORTS CLUB. IT IS NOWHERE M ENTIONED EITHER IN THE ORDER OF THE AO OR IN THE STATEMENT OF FACTS BE FORE THE CIT(A) OR IN THE ORDER OF THE CIT(A) AS TO WHAT IS THE CAPACI TY OF SHRI VINOD SANGHVI IN THE COMPANY. IN ORDER TO BE ALLOWED AS REVENUE EXPENDITURE, THE ASSESSEE COMPANY UNDER OBLIGATION TO ESTABLISH ON FACTS THAT THE EXPENDITURE HAS BEEN INCURRED FOR BU SINESS PURPOSES. IN THE ABSENCE OF ELEMENTARY DETAILS ABOUT THE DETAILS OF SHRI VINOD SANGHVI, HOW THE EXPENDITURE HAS BENEFITTED THE COM PANY, WHAT IS THE POLICY OF THE COMPANY FOR INCURRING SUCH EXPENSES T OWARDS OTHER EMPLOYEES ETC. IT IS DIFFICULT TO ASCERTAIN THE CO RRECTNESS OR OTHERWISE OF THE EXPENDITURE INCURRED. ON BEHALF OF THE ASSE SSEE, SEVERAL DECISIONS HAVE BEEN CITED FOR ALLOWABILITY OF EXPEN DITURE. HOWEVER, WITHOUT LOOKING INTO FACTUAL ASPECTS, THE PRINCIPLE S LAID DOWN IN THE DECISIONS WOULD REMAIN IN CONSEQUENTIAL. THUS, WE IN THE ABSENCE OF FACTUAL MATRIX, WE SET ASIDE THE ORDER OF THE CIT(A ) AND REMIT THE ISSUE BACK TO THE FILE OF THE AO FOR DE NOVO CONSIDERATION IN ACCORDANCE WITH LAW AFTER GIVING PROPER OPPORTUNITY TO THE ASSESSEE. ITA NO.793 & 767/AHD/16 [M/S. RAAJRATNA METAL INDUSTRIES LTD.] A.Y. 2011-12 - 10 - 21. IN THE RESULT, GROUND NOS. 5 & 6 OF THE REVENUE S APPEAL ARE ALLOWED FOR STATISTICAL PURPOSES. 22. IN THE RESULT, THE APPEAL OF THE REVENUE IS PAR TLY ALLOWED. 23. IN THE COMBINED RESULT, WHILE THE ASSESSEES AP PEAL IS ALLOWED, THE APPEAL OF THE REVENUE IS ALLOWED IN PART. SD/- SD/- (RAJPAL YADAV) (PRADIP K UMAR KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 04/10/2018 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+4 56) / DR, ITAT, AHMEDABAD 7. 289 : / GUARD FILE. BY ORDER / 4 /5 *+4 56) THIS ORDER PRONOUNCED IN OPEN COURT ON 04/ 10 /2018