The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) in Dy. Commissioner of Income Tax vs. M/s. Deloitte Touche Tohmatsu held that expenditure incurred towards club and hotel membership fees is an allowable expense under Section 37(1) of the Income Tax Act, 1961.
The assessee is engaged in the business of providing Corporate Finance Services, Bid Support Services and Vendor Assistance. In the returns filed by the assessee, a loss of Rs.78.30 Lacs were shown. The Assessing Officer (A.O.) found that an amount of Rs.15.63 Lacs were paid as membership and subscription fee of a director in certain club and hotel. Treating it as a capital expenditure the A.O disallowed the said expenses. However, the Commissioner of Income Tax (Appeals) (CIT(A)) relying on the decision of the Supreme Court in CIT vs. United Glass Manufacturing Co. Ltd. deleted the disallowance made by the A.O. The Revenue appealed before the ITAT.
The Departmental Representative (D.R) argued that expenditure incurred by the assessee being of an enduring nature was a capital expenditure, hence, was not allowable as deduction. The Authorised Representative of the assessee relied on the decisions of the CIT(A).
The Bench comprising of Judicial Member Saktijit Dey and Accountant Member Rajesh Kumar observed “As could be seen from the facts on record, the dispute is with regard to assessee’s claim of deduction on account of payment made towards club and hotel membership fee of a director. It is the say of the Department that the said payment being capital in nature is not allowable. However, in our considered opinion, the issue now stands settled by the decision of the Hon’ble Supreme Court in United Glass Manufacturing Co. Ltd. (supra), wherein, the Hon’ble Supreme Court has held that such expenditure is allowable under section 37(1) of the Act. In view of the aforesaid, we uphold the order of the learned Commissioner (Appeals) on this issue.”
Subscribe Taxscan Premium to view the Judgment
