The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) directed re-adjudication for the rejection of a claim of expenditure incurred for club members on the ground of non-business expenses.
New Globe Logistik Pvt. Ltd, the appellant assessee was engaged in the business of freight forwarding for import and export cargo by air and sea and provided logistic support to its client during the year.
The assessee appealed against the order passed by the Commissioner of Income Tax (Appeals) for confirming the order passed by the assessing officer for disallowing an amount for club membership fees paid to Cricket Club of India due to non-genuine and non-business related expenses.
Nishit Gandhi, the counsel for the assessee contended that based on various decisions by the high court and Supreme court that the club membership fees for employees incurred by the assessee were a business expense under section 37 of the Income Tax Act.
It was also submitted that the assessee’s director becoming a partner in the Limited liability partnership would be able to garner the benefits by becoming a member of the Cricket Club of India. Therefore, the expenses incurred were allowable expenditures.
Anil Gupta, the counsel for the revenue contended that the assessee company at the fag of its life, had made the subscription for its director to get purely personal membership. And therefore, could not have been allowed as an expenditure.
A single-member bench comprising Aby T. Varkey (judicial) held that the assessee company functions through the director/shareholders and even though converted to a Limited liability partnership, still functions through the key persons and the entrance fees paid by the assessee for becoming a member of the Cricket Club of India would inure benefits for the business of the assessee.
It was also directed to the assessing officer to re-adjudicate the matter and to delete the addition made by him while allowing the appeal filed by the assessee.
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