The Income Tax Appellate Tribunal (ITAT), Mumbai Bench, while granting relief to assessee ICICI Bank, held that expenses incurred towards the club membership fee of employees are business expenditure. The assessee, ICICI Bank Ltd, is engaged in the business of banking and related activities. The Assessing Officer (AO) noticed from the Tax Audit Report that the assessee has incurred expenses towards club entrance fees and subscription to the extent of Rs. 1,13,85,062.
After considering the submission of the assessee, the AO treated the Membership Fees as capital in nature. The reason provided was that the payment made is towards initial payments for entrance that pertains to several years, and therefore, held as capital expenditure.
Aggrieved by the order, the assessee filed a further appeal before the CIT(A), who allowed the appeal. Thereafter, the revenue filed a second appeal before the tribunal. During the proceedings, Aarti Vissanji, Counsel for the assessee, submitted that the issue is covered by the decision of the Coordinate Bench in the assessee’s own case for AY 2004-05 and 2005-06. The bench held that club membership fees for employees are to be treated as business expenditure of a company under Section 37 of the Income Tax Act.
Himanshu Sharma, Counsel for Revenue, supported the order of the assessing officers. After reviewing the facts and records, the two-member bench of Padmavathy S (Accountant Member) and Amit Shukla (Judicial Member) held that expenses incurred towards the club membership fee of employees are business expenditure.
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